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SALES AND USE TAX APPLICATION TO FARMING, TIMBER HARVESTING, NURSERY OPERATIONS, AND AGRITOURISM

(a) Must be the owner or lessee of agricultural land from which $1,000 or more of agricultural products were

produced or sold during the year, including payments from government sources;

(b) Must be in the business of providing for-hire custom agricultural services of plowing, planting, harvesting,

growing, raising, or processing agricultural products or the maintenance of agricultural land;

Space Land Act of 1976;

(d) The applicant’s federal income tax return contains one or both of the following:

(i) Business activity on IRS Schedule F (Profit or Loss from Farming);

(ii) Farm rental activity on IRS Schedule 4835 (Farm Rental Income and Expenses); or

(e) The applicant must establish to the satisfaction of the commissioner that he or she is actively engaged in the

business of raising, harvesting, or otherwise producing agricultural commodities.

40. I live just across the state line in Kentucky. I operate a farm in Kentucky. I buy a lot of my farm

equipment and supplies in Tennessee. Can I qualify for the Agricultural Sales and Use Tax Certificate of

Exemption?

Yes. Farmers, timber harvesters, and nursery operators that are located outside Tennessee can apply for and receive

the Tennessee Agricultural Sales and Use Tax Certificate of Exemption in the same manner as in-state farmers,

timber harvesters, or nursery operators. Not all states issue certificates of exemption to farmers, timber harvesters, or

nursery operators located in their states. However, certificates of exemption issued to farmers, timber harvesters, or

nursery operators by other states will not be honored. To make tax-exempt purchases in this state, they will need to

apply for the Tennessee Agricultural Sales and Use Tax Certificate of Exemption.

41. Does a sawmill operator qualify as tax-exempt and the sawmill equipment qualify as farm equipment and

machinery?

No. A sawmill is after-the-fact of timber harvesting and does not fall within the exemption for cutting and

harvesting timber. However, because the mill converts the logs to lumber for sale, upon application to the

department, the sawmill operator may be considered eligible for exemption from sales tax as a manufacturer.

42. Is cotton ginning considered farming?

There are at least three possibilities in this category:

(a) A qualified farmer with an agricultural certificate of exemption purchases his own gin to gin the cotton that he

has grown. The cotton gin is machinery and equipment used directly and principally to produce an agricultural

product and can be purchased tax exempt by the qualified farmer.

(b) A business owns a gin. Such business gins the cotton for area farmers and is either paid for the service of ginning

by the farmers’ cotton or exchanges the ginning service for the cotton seeds. The cotton is returned to the farmer.

This business may have already qualified for and received authorization from the department as a manufacturer.

This business can qualify for the Agricultural Sales and Use Tax Certificate of Exemption under the criteria of

providing for-hire custom agricultural services for the processing of agricultural products. The cotton gin, repair or

replacement parts, and repair labor for the cotton gin, and the electricity, natural gas, liquefied gas, or fuel oil used to

operate the gin can be purchased tax exempt by a person in the business of providing for-hire ginning services if the

person is a holder of an Agricultural Sales and Use Tax Certificate of Exemption. The electricity, natural gas,

liquefied gas, or fuel oil used to operate the cotton gin is directly used to produce fiber for human consumption.

Such energy fuel used to operate the gin must be separately metered from other energy fuels that are subject to tax at

the 1.5% tax rate on energy fuel sold to and use by manufacturers.

Form Rv-F1308401 - Application For Registration Agricultural Sales And Use Tax Certificate Of Exemption - 2009 Page 14