Is machinery and equipment used to process feed at a feedlot exempt from Kansas retailers' sales tax as farm machinery and equipment?

Plain-English summary

A poultry operation runs a feedmill to process feed, then delivers that feed to its birds in the field, where the feed is consumed as part of the final product. The operator asked whether the machinery and equipment used to process the feed is exempt from Kansas retailers' sales tax.

Kansas exempts "all sales of farm machinery and equipment," and the statute expressly provides that "Farming or ranching shall include the operation of a feedlot" (K.S.A. 79-3606(t)). The Department concluded that this segment of the operation is a feedlot, that feedlot operations are farming and ranching, and therefore that the machinery and equipment used to process feed for the birds qualifies for the farm machinery and equipment exemption.

What this means for you

If you buy machinery and equipment to process feed as part of a feedlot operation in Kansas, that equipment can qualify for the farm machinery and equipment exemption.

• Feedlot operations count as farming/ranching. The statute itself says farming or ranching includes operating a feedlot, so feed-processing equipment for a feedlot can be exempt farm machinery and equipment.
• The exemption is for qualifying farm machinery and equipment. It applies to sales of the machinery and equipment used in the exempt operation — not to every purchase a business makes.
• Document the exempt use. To buy exempt, provide the seller a properly completed Kansas agricultural/farm-machinery exemption certificate; the seller needs it to support the exempt sale.
• Facts drive the result. The ruling rests on the specific finding that this segment was a feedlot; a different setup could be analyzed differently.

Common questions

Is feed-processing machinery exempt in Kansas?
Here, yes. The Department ruled the machinery and equipment used to process feed at what it found to be a feedlot qualifies for the farm machinery and equipment exemption under 79-3606(t).

Why does calling it a "feedlot" matter?
Because 79-3606(t) defines farming or ranching to include the operation of a feedlot. Once the operation is a feedlot, its farm machinery and equipment can be exempt.

How do I claim the exemption when I buy?
Give the seller a completed Kansas farm machinery and equipment (agricultural) exemption certificate so the sale is documented as exempt.

Can other producers rely on this ruling?
Not directly. A private letter ruling binds the Department only for the requesting taxpayer and stated facts; treat it as guidance.

Citations and references

• K.S.A. 79-3606(t) — exempts "all sales of farm machinery and equipment" and provides that "Farming or ranching shall include the operation of a feedlot." The Department held the feed-processing machinery and equipment qualifies because the operation is a feedlot.

Source

• Original ruling (DOCX): https://www.ksrevenue.gov/pildocs/rulings/P-1999-81.docx
• Kansas Policy Information Library: https://www.ksrevenue.gov/prpil.html

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

March 31, 1999

XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXX

Dear XXXXXXXXXXX:

I have been asked to respond to your letter of March 18, 1999. In it, you ask if machinery and equipment used to process feed is exempt from Kansas retailers’ sales tax.

In your letter you stated:

“The feed that is processed at the feedmill is delivered to the XXXX in the field. The feed becomes part of the final product as it is consumed by the turkeys. Both the XXXX in the field and feed fed to those XXXX are the property of XXXXXXXXXat all times.”

Kansas law exempts from sales and compensating tax “all sales of farm machinery and equipment. . . Farming or ranching shall include the operation of a feedlot. . .” K.S.A. 79-3606(t).

It is the opinion of the Kansas Department of Revenue that this segment of your operation is a feedlot. Farming and ranching include feedlot operations. Therefore, machinery and equipment to process feed for your XXXX qualifies for exemption as farm machinery and equipment.

This is a private letter ruling pursuant to Kansas Administrative Regulation 92-19-59. It is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to 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 ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Date Composed: 04/02/1999 Date Modified: 10/11/2001

Table 1

Table 2