Are the materials a contractor pours into a farm bunker silo's floor and walls exempt from New York sales and use tax as farm-silo property?

Plain-English summary

Akins Construction Ltd. builds bunker silos on-site for farmers to make and store silage. A bunker silo is a poured concrete slab floor, sometimes with concrete sidewalls. When there are sidewalls, the contractor thickens the outer edges of the poured floor so the floor can carry the height and weight of the walls. The contractor asked whether the materials it pours into these silos are exempt under the farm-silo exemption, Tax Law § 1115(a)(6).

The Department drew a line based on what each part of the concrete does:

• Floor-only silo (uniform thickness) — exempt. When the silo is just a poured floor with no sidewalls and no thickened edges, the materials become an integral part of the silo, so the contractor's purchase and use of them is exempt under § 1115(a)(6) and Regulation § 528.7.
• Sidewalls — exempt. The materials used in the sidewalls become an integral part of the silo and are exempt.
• Thickened floor edges — taxable. § 1115(a)(6) exempts silo materials but the exemption "does not apply to materials used in the foundations of silos." Because the outer edges of the floor are thickened specifically to bear the weight of the walls, that portion serves the same function as a supportive foundation and does not qualify. The contractor is liable for sales tax under § 1105(a) or compensating use tax under § 1110 on the materials in the thickened area.

The Department added that the contractor's charges to the customer for the silo are likewise exempt except for the foundation portion; and that charges for the thickened area are exempt as a capital improvement to real property under § 1105(c)(3)(iii). To document all this, the contractor should obtain Form ST-125 (Farmer's Exemption Certificate) and, where applicable, Form ST-124 (Certificate of Capital Improvement) from the customer, and may buy the materials tax-free using Form ST-120.1 (Contractor Exempt Purchase Certificate) — while remaining liable for use tax on the thickened-floor materials.

What this means for you

The farm-silo exemption follows function, not just the label "silo"

Tax Law § 1115(a)(6) exempts property that becomes an integral component of a silo used in farming to make and store silage — but it carves out silo foundations. So the analysis isn't "is it part of the silo?" but "does this concrete act as the silo, or as its foundation?" Ordinary floor and wall concrete is exempt; concrete poured thicker precisely to support the walls is a foundation and is taxable.

Contractors: split the job and self-assess use tax on the foundation slice

If you pour a thickened, load-bearing edge, treat the materials in that slice as taxable and pay use tax under § 1110, even though you buy the rest of the materials exempt. Buying everything with a Form ST-120.1 doesn't erase the use-tax liability on the foundation portion — it just shifts when and how you account for it.

Keep the exemption certificates

Get a Form ST-125 (farmer's exemption) from the farmer and, for the capital-improvement portion, a Form ST-124. These substantiate not charging tax on the exempt work; without them you may have to treat the charges as taxable.

Common questions

Q: Are the materials in a plain bunker-silo floor taxable?
A: No. A uniform poured floor with no thickened edges becomes an integral part of the silo and is exempt under § 1115(a)(6).

Q: What about the sidewalls?
A: The sidewall materials are also an integral part of the silo and are exempt.

Q: Why is the thickened edge of the floor taxable?
A: Because it is thickened to carry the weight of the walls, so it functions as a supportive foundation — and the § 1115(a)(6) exemption doesn't apply to silo foundations.

Q: How does the contractor handle the tax on the taxable portion?
A: It owes sales tax under § 1105(a) or, if it bought the materials exempt with Form ST-120.1, compensating use tax under § 1110 on the thickened-area materials.

Citations and references

Statutes, regulations, and authorities:

• Tax Law § 1115(a)(6) (exemption for property that becomes an integral component of a farm silo used to make and store silage; foundation carve-out)
• Tax Law § 1105(c)(3)(iii) (installation constituting a capital improvement to real property)
• Tax Law § 1105(a) (tax on retail sales of tangible personal property)
• Tax Law § 1110 (compensating use tax)
• Sales and Use Tax Regulations § 528.7 (farming exemption; silo materials integral part; foundation exclusion)
• Forms ST-125 (Farmer's Exemption Certificate), ST-124 (Certificate of Capital Improvement), ST-120.1 (Contractor Exempt Purchase Certificate)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_1992.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a92_18s.pdf

Original ruling text

New York State Department of Taxation and Finance

Taxpayer Services Division
Technical Services Bureau

TSB-A-92 (18)S
Sales Tax
March 2, 1992

STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S911009A

On October 9, 1991 a Petition for Advisory Opinion was received from Akins Construction
Ltd., Rt. 1, Box 108, Ogdensburg, N.Y. 13669.
The issue raised by Petitioner, Akins Construction Ltd., is whether the receipts from its
charge for materials incorporated into the floor and walls of a bunker silo qualify for the exemption
from sales and compensating use tax as provided under Section 1115(a)(6) of the Tax Law and
Section 528.7(a)(1)(ii)(b) of the Sales and Use Tax Regulations.
Petitioner is in the business of performing on site construction of bunker silos for farmers for
use in making and storing silage. Petitioner uses cement and other material in constructing the
bunker silos. Bunker silos consist of a poured concrete slab for the floor, with or without the addition
of side walls. When Petitioner constructs a bunker silo which will include side walls, the outer edges
of the area to be covered by the poured floor are excavated to allow for the thickness of the outer
edges of the poured floor to be varied in accordance with the height and weight of the side walls.
Section 1105 of the Tax Law states, in part:
Imposition of sales tax.--. . .there is hereby imposed and there shall be paid a tax. .
.upon:
(c) The receipts from every sale, except for resale of the following services:
(3) Installing tangible personal property. . .except:
(iii) for installing property which, when installed will constitute an addition or capital
improvement to real property, property or land. . .
Section 1110 of the Tax Law states, in part:
Imposition of compensating use tax.--Except to the extent that property or services
have already been or will be subject to the sales tax under this article, there is hereby
imposed on every person a use tax for the use within this state. . ., except as
otherwise exempted under this article, (A) of any tangible personal property
purchased at retail. . .
Section 1115 of the Tax Law states, in part:
Exemptions from sales and use taxes.--(a) Receipts from the following shall be
exempt from the tax on retail sales imposed under subdivision (a) of section eleven
hundred five and the compensating use tax imposed under section eleven hundred
ten:

-2­
TSB-A-92 (18)S
Sales Tax
March 2, 1992
(6). . .tangible personal property for use in erecting, adding to, altering or improving a silo
used in farming to make and store silage on a farm, provided such tangible personal property
is to become an integral component of such silo.
Section 528.7 of the Sales and Use Tax Regulations states, in part:
Farming. [Tax Law, §§1105(c)(3) 1115(a)(6)] (a) Exemption.
(1)(i) All tangible personal property for use or consumption. . .in the
production for sale of tangible personal property by farming, with the
exception of property which will be incorporated into a building or
structure is exempt from the sales and compensating use tax.
(ii) Notwithstanding the exception stated in subparagraph (i) of this
paragraph:
(b) all tangible personal property for use in erecting, adding to, altering or
improving a silo used in farming to make and store silage on a farm is exempt
provided such tangible personal property is to become an integral part of such
silo. However, this exemption does not apply to materials used in the
foundations of silos.
Accordingly, when Petitioner installs a bunker silo which only consists of a poured concrete
floor, without sidewalls, and which does not require that the outer edges of the floor vary in
thickness from the rest of the floor, the materials which are used in the job will be considered to
become an integral part of the bunker silo and Petitioner's purchase and use of the materials will be
exempt from sales tax under the provisions of Section 1115(a)(6) of the Tax Law and Section 528.7
of the Sales and Use Tax Regulations.
When Petitioner installs a bunker silo consisting of a poured concrete floor and sidewalls,
the materials which are used in the sidewalls will be considered to become an integral part of the
bunker silo and Petitioner's purchase and use of the materials will qualify for the exemption from
sales tax provided under Section 1115(a)(6) of the Tax Law and Section 528.7 of the Sales and Use
Tax Regulations.
However in the latter case, only a portion of the materials which are used in the poured floor
will qualify for the exemption provided under Section 1115(a)(6) of the Tax Law and Section 528.7
of the Regulations, while the remainder of the materials used will be subject to the tax imposed
under either Section 1105(a) or 1110 of the Tax Law. Because the thickness of the outer edges of
the poured floor will vary in accordance to the height (and thereby weight) of the side walls, that
portion of the poured floor will be considered to serve the same function as a supportive foundation
thereby alleviating the necessity of installing a separate supportive foundation, and accordingly will
not qualify for the exemption provided under Section 1115(a)(6) of the Tax Law or Section 528.7
of the Sales and Use Tax Regulations. Petitioner will be liable for paying the sales tax

-3­
TSB-A-92 (18)S
Sales Tax
March 2, 1992
imposed under Section 1105(a) or the compensating use tax imposed under Section 1110 of the Tax
Law on the portion of materials used in the thickened area of the floor.
Petitioner's receipts from charges to customers for constructing the bunker silos, except for
the portion which serves the function of a supportive foundation, will be also be exempt from sales
tax under the provisions of Section 1115(a)(16) of the Tax Law and Section 528.7 of the Sales and
Use Tax Regulations. Petitioner's receipts from charges to customers for the thickened areas of the
floor will be exempt from tax under the provision of Section 1105(c)(3)(iii) of the Tax Law as the
manner of installation of such area is considered to meet the conditions required for a capital
improvement.
Petitioner should obtain a properly completed form ST-125, Farmer's Exemption Certificate
and form ST-124, Certificate of Capital Improvement, where applicable, from the customer as
substantiation for not collecting sales tax on the receipts from charges to the customer.
Petitioner may purchase the materials for use in the bunker silo tax exempt by presenting the
building supplier with a properly completed Form ST-120.1, Contractor Exempt Purchase
Certificate. However, Petitioner will be liable for the compensating use tax on that portion of
materials which are incorporated in the thickened area of the floor.

DATED: March 2, 1992

s/PAUL B. COBURN
Deputy Director
Taxpayer Services Division

NOTE: The opinions expressed in Advisory Opinions
are limited to the facts set forth therein.