Is equipment purchased or leased by a farmer or rancher to remove phosphorus from feedlot manure, urine, and runoff exempt from Kansas sales tax?

Plain-English summary

A requester described equipment called “Phred” that removed phosphorus from manure, urine, and runoff at livestock feedlots. The equipment was purchased or leased by feedlots and used exclusively there to prepare waste material for agronomically safe application to cropland.

The Department gave a short, direct answer: the equipment qualified as exempt farm and ranch equipment under K.S.A. 79-3606(t). The conclusion covered acquisition by purchase or lease under the facts presented.

What this means for you

Farmers, ranchers, and feedlot operators

The phosphorus-removal equipment described in the letter qualified for the farm-and-ranch-equipment exemption when used exclusively at the feedlot. Preserve the equipment description, purchase or lease agreement, and evidence of qualifying agricultural use.

Equipment vendors and lessors

The exemption was tied to the buyer or lessee being a farmer or rancher and to the equipment's feedlot waste-management use. Obtain the current Kansas farm-equipment exemption documentation before making an exempt sale or lease.

Tax professionals

This is a product- and use-specific conclusion. The source contains no broader analysis of other environmental equipment, so do not extend it beyond substantially similar feedlot facts without current authority.

Common questions

Q: Did the exemption apply only to a purchase?
A: No. The question and conclusion covered equipment acquired by purchase or lease.

Q: What did the equipment do?
A: It removed phosphorus from feedlot manure, urine, and runoff before the material was applied to cropland.

Q: What statute supported the exemption?
A: K.S.A. 79-3606(t), the farm and ranch machinery and equipment exemption cited by the Department.

Citations and references

• K.S.A. 79-3606(t) — farm and ranch machinery and equipment exemption

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-2009-007

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

May 12, 2009

XXXXXXXXXX
XXXXXXXXX
XXXXXXXXX
XXXXXXXXXXXXXX

The purpose of this letter is to respond to your letter dated April 9, 2009. In it, you ask if the acquisition by purchase or lease of equipment that removes phosphorus from feedlot wastes is exempt from Kansas retailers’ sales tax if purchased by a farmer or rancher.

In your letter you stated:

We request a review of a sales tax question regarding the purchase or lease of equipment that handles manure, urine and runoff water at livestock facilities.

Feedlots are required to capture and handle all manure, urine and water generated at the operation. Environmental Protection Agency regulations mandate feedlots have the necessary farm equipment available to handle this part of the production process. The farm equipment must be able to pump, prepare and apply the material to crop land in an agronomical safe manner.

There is a specific piece of equipment (Phred) that removes phosphorus from the manure & urine runoff at the feedlot. Feedlots purchase or lease this equipment and it is used exclusively at the feedlot.

We believe this equipment qualifies for the farm machinery and equipment sales tax exemption.

It is the opinion of the Kansas Department of Revenue that the equipment referred to as Phred does qualify as exempt farm and ranch equipment pursuant to K.S.A. 79-3606(t).

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 05/13/2009 Date Modified: 05/13/2009

Table 1

Table 2