Is gopher bait used exclusively on land for agricultural production exempt from Kansas sales tax?

Plain-English summary

The question was whether sales of gopher bait "used exclusively on land for agricultural production" are exempt from Kansas sales tax.

The tax and the exemption. The Kansas sales tax is imposed by K.S.A. 79-3603, subsection (a), on retail sales of tangible personal property. The relevant exemption is K.S.A. 79-3606(n), which covers "all sales [of] tangible personal property which is consumed in the production, manufacture, processing, mining, drilling, refining or compounding of tangible personal property ... the providing of services or the irrigation of crops for ultimate sale at retail." A qualifying purchaser can obtain and furnish the supplier an exemption certificate number for such consumed property.

The definition that clinches it. "Property which is consumed" is defined in K.S.A. 79-3602(m), and the statute's own non-exclusive list includes: "Insecticides, herbicides, germicides, pesticides, fungicides, fumigants, antibiotics, biologicals, pharmaceuticals, vitamins and chemicals for use in commercial or agricultural production, processing or storage of fruit, vegetables, feeds, seeds, grains, animals or animal products."

The holding. "[W]e are of the opinion gopher bait used exclusively on land for agricultural production meets the definition of 'property which is consumed', and that it falls within the exemption provided by K.S.A. 79-3603(n) [sic — 79-3606(n)]. As a result, the gopher bait would be exempt from Kansas sales tax."

Bottom line: gopher bait used exclusively for agricultural production is an exempt consumed-in-production input, like other pesticides used in producing crops or animals for sale.

What this means for you

Pest-control inputs for ag production are consumed-in-production

Gopher bait — a pesticide used on land for agricultural production — is "property which is consumed" under K.S.A. 79-3602(m) and exempt under K.S.A. 79-3606(n). The statute's list of consumed property expressly includes pesticides and similar chemicals used in agricultural production.

"Used exclusively" for ag production is the key fact

The exemption here rests on the gopher bait being used exclusively on land for agricultural production of crops or animals for ultimate sale. Product put to a non-production use (for example, controlling pests around a residence or a non-agricultural site) would not fit the consumed-in-production exemption.

Use a consumed-in-production exemption certificate

K.S.A. 79-3606(n) lets a qualifying purchaser obtain an exemption certificate number from the Director of Taxation and give it to the supplier, so the purchase can be made without tax. Keep that certificate on file to document the exempt sale.

This is distinct from the farm-machinery exemption

The exemption relied on here is the consumed-in-production exemption (79-3606(n)), not the farm-machinery exemption (79-3606(t)). Consumables used up in producing the crop or animals qualify under (n); the farm equipment itself and its parts qualify under (t).

Common questions

Q: Is gopher bait for a farm exempt from Kansas sales tax?
A: Yes, when used exclusively on land for agricultural production. The Department ruled it is "property which is consumed" and exempt under K.S.A. 79-3606(n).

Q: Why does gopher bait qualify?
A: Because it is a pesticide used in agricultural production, and the statutory definition of consumed property (K.S.A. 79-3602(m)) expressly lists pesticides and similar chemicals used in agricultural production.

Q: How do I buy it without tax?
A: A qualifying purchaser obtains a consumed-in-production exemption certificate number and furnishes it to the supplier, as provided in K.S.A. 79-3606(n).

Citations and references

• K.S.A. 79-3603(a) — imposes Kansas sales tax on the gross receipts from the retail sale of tangible personal property.
• K.S.A. 79-3606(n) — exempts tangible personal property consumed in the production of tangible personal property, the providing of services, or the irrigation of crops for ultimate sale; the operative exemption for the gopher bait (the ruling's body contains a typographical reference to "79-3603(n)").
• K.S.A. 79-3602(m) — defines "property which is consumed" and lists insecticides, pesticides, and similar chemicals used in agricultural production as included.
• K.A.R. 92-19-59 — the regulation authorizing private letter rulings; this ruling was issued under it and binds the Department only as to the requesting taxpayer.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-114

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

May 11, 1999

XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX
XXXXXXXXXX

Re: Kansas Sales Tax

Dear XXXXXXXXXX:

I am in receipt of your correspondence of April 21, 1999. Thank you for your inquiry.

By your letter you ask whether sales of gopher bait used exclusively on land for agricultural production are exempt from Kansas sales tax. As you know, the Kansas sales tax is imposed by K.S.A. 79-3603. Subsection (a) of the statute imposes sales tax on:

(a) The gross receipts received from the sale of tangible personal property at retail within this state;

Exemptions from sales tax are found in K.S.A. 79-3606. Subsection (n) of the statute provides an exemption for:

(n) all sales or tangible personal property which is consumed in the production, manufacture, processing, mining, drilling, refining or compounding of tangible personal property, the treating of by-products or wastes derived from any such production process, the providing of services or the irrigation of crops for ultimate sale at retail within or without the state of Kansas; and any purchaser of such property may obtain from the director of taxation and furnish to the supplier an exemption certificate number for tangible personal property for consumption in such production, manufacture, processing, mining, drilling, refining, compounding, treating, irrigation and in providing such services;

The phrase “property which is consumed” is defined in K.S.A. 79-3602(m). The subsection provides:

(m) “Property which is consumed” means tangible personal property which is essential or necessary to and which is used in the actual process of and immediately consumed or dissipated in (1) the production, manufacture, processing, mining, drilling, refining or compounding of tangible personal property, (2) the providing of services or (3) the irrigation of crops, for sale in the regular course of business, and which is not reusable for such purpose. The following items of tangible personal property are hereby declared to be “consumed” but the listing of such property shall not be “consumed” but the listing of such property shall not be deemed to be exclusive nor shall such listing be construed to be a restriction upon or an indication of, the type or types of property to be included within the definition of “property which is consumed” as herein set forth:
(A) Insecticides, herbicides, germicides, pesticides, fungicides, fumigants, antibiotics, biologicals, pharmaceuticals, vitamins and chemicals for use in commercial or agricultural production, processing or storage of fruit, vegetables, feeds, seeds, grains, animals or animal products whether fed, injected, applied, combined with or otherwise used; and
(B) electricity, gas and water.

Based on the statutes cited above, we are of the opinion gopher bait used exclusively on land for agricultural production meets the definition of “property which is consumed”, and that it falls within the exemption provided by K.S.A. 79-3603(n). As a result, the gopher bait would be exempt from Kansas sales tax.

I trust this information is of assistance. If I can be of further service, please feel free to contact me.

Sincerely,

Jim Weisgerber
Attorney
Tax Specialist

JW:jw

Date Composed: 05/13/1999 Date Modified: 10/11/2001

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