Which cattle-breeding and animal-care items sold to Kansas farmers and ranchers are exempt from sales tax?

Plain-English summary

A supplier asked the Department to sort out the sales-tax treatment of a range of cattle-breeding and animal-care items sold to Kansas farmers and ranchers. The Department first laid out the three farm/ranch exemptions, then applied them item by item.

The three exemptions. Kansas sales tax law contains three exemptions that generally apply to farm and ranch operations: sales of property or services that are an "ingredient or component part" of property for ultimate resale, under K.S.A. 79-3606(m); sales of property or services "consumed in the process of producing" property, under K.S.A. 79-3606(n); and "[a]ll sales of farm machinery and equipment . . . repair and replacement parts therefor and services performed in the repair and maintenance of such machinery and equipment," under K.S.A. 79-3606(t).

Bull semen and insemination service. The purchase of semen "by persons engaged in the business of breeding and raising cattle for ultimate resale is exempt pursuant to K.S.A. 79-3606(m)," and the delivery charge is exempt if the item is exempt. The gross receipts from performing insemination services in connection with cattle production are also exempt.

Artificial-insemination supplies and equipment. Exempt as consumed in production: "[d]isposable plastic gloves, lubricants and paper toweling." Exempt as farm machinery and equipment: catheters and ear tags; and implanting guns, sheaths, thermometers, and thaw units (used to thaw frozen semen straws).

Animal-care products. Exempt as consumed in production: antibiotics, wormers, hormones, insecticide applied directly on animals, teat dip, "detail tail paint," and liquid nitrogen. Exempt as farm machinery and equipment: Kamar heat detectors, calf jackets, and biostat tanks. Feed supplements are exempt "as an ingredient or component part."

Documentation. The Department stressed that the seller "should always obtain . . . an exemption certificate from the purchaser claiming an exemption from sales tax," and enclosed a booklet of the appropriate certificates.

Bottom line: most inputs a cattle producer uses to breed and raise animals for sale fall under one of the three farm exemptions — as consumed in production, as farm machinery/equipment, or as an ingredient/component part — but the exemption must be supported by a properly completed exemption certificate.

What this means for you

Cattle and livestock producers

Bull semen, insemination services, AI supplies and equipment, and a wide range of animal-care products used to raise cattle for resale are exempt under one of the three farm exemptions. Give your suppliers a completed exemption certificate so they can sell to you tax-free.

Agricultural suppliers and vendors

Match each item to the right exemption — consumed-in-production, farm machinery/equipment, or ingredient/component part. Even when an item qualifies, protect the exempt sale by obtaining and keeping a properly completed exemption certificate from the buyer.

Delivery and freight charges

A delivery charge follows the item: if the item purchased is exempt, its delivery charge is exempt too.

Common questions

Q: Is bull semen taxable in Kansas?
A: No, for producers breeding and raising cattle for resale. It is exempt as an ingredient or component part under K.S.A. 79-3606(m), and its delivery charge is exempt because the item is exempt.

Q: Are AI supplies and animal-care products exempt?
A: Many are. Disposable gloves, lubricants, paper toweling, antibiotics, wormers, hormones, on-animal insecticide, teat dip, tail paint, and liquid nitrogen are exempt as consumed in production; catheters, ear tags, implanting guns, sheaths, thermometers, thaw units, heat detectors, calf jackets, and biostat tanks are exempt farm machinery and equipment; feed supplements are exempt as an ingredient or component part.

Q: Do I need any paperwork for the exemption?
A: Yes. The seller should always obtain a properly completed exemption certificate from the purchaser claiming the exemption.

Citations and references

• K.S.A. 79-3606(m) — exempts property or services that are an ingredient or component part of property for ultimate resale; the basis for exempting bull semen and feed supplements.
• K.S.A. 79-3606(n) — exempts property or services consumed in the process of production; the basis for exempting AI supplies (gloves, lubricants, paper toweling) and animal-care products (antibiotics, wormers, hormones, on-animal insecticide, teat dip, tail paint, liquid nitrogen).
• K.S.A. 79-3606(t) — exempts farm machinery and equipment, repair and replacement parts, and repair/maintenance services; the basis for exempting catheters, ear tags, implanting guns, sheaths, thermometers, thaw units, heat detectors, calf jackets, and biostat tanks.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-1999-221

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

September 24, 1999

XXXXXX
XXXXXXXXXXXX
XXXXXXXXXXXXXXX

Dear XXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated August 19, 1999. Your request advise on the taxability of the following items sold to farmers and ranchers in Kansas.

Kansas retailers’ sales tax law contains three exemptions that generally apply to farm and ranch operations. Specially: Sales of tangible personal property and services that are and ingredient or component part of tangible personal or services for ultimate resale. K.S.A. 79-3606(m). Sales of tangible personal property and services that are consumed in the process of producing of tangible personal property or services. K.S.A. 79-3606(n). All sales of farm machinery and equipment or aquaculture machinery and equipment, repair and replacement parts therefor and services performed in the repair and maintenance of such machinery and equipment. K.S.A. 79-3606(t).

In answer to your specific questions:

Bull Semen. The purchase of semen by persons engaged in the business of breeding and raising cattle for ultimate resale is exempt pursuant to K.S.A. 79-3606(m). The delivery charge is exempt if the item purchased is exempt.

Insemination Service. The gross receipts from the service of performing insemination services in connection with production of cattle is exempt.

Artificial Insemination Supplies. The following items are exempt as consumed in production: Disposable plastic gloves, lubricants and paper toweling. Catheters and ear tags are exempt as farm machinery and equipment.

Artificial Insemination Equipment. The following items are exempt farm machinery and equipment: implanting guns, sheaths, thermometers and thaw units (used to thaw frozen semen straws).

Animal Care Products. The following items are exempt as consumed in production: Antibiotics, wormers, hormones, insecticide (that is applied directly on animals), teat dip, detail tail paint and liquid nitrogen. The following items are exempt farm machinery and equipment: Kamar heat detectors, calf jackets and biostat tanks. Feed supplements are exempt as an ingredient or component part.

You should always obtain from an exemption certificate from the purchaser claiming an exemption from sales tax.
I have enclosed a booklet that contains the appropriate exemption certificates and instructions.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to make an accurate determination by the department, this ruling is null and void. This private letter ruling will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 11/03/1999 Date Modified: 10/11/2001

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