Form Pub. Ks-1550 - Kansas Business Taxes For The Agrcultural Industry Page 8
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32used for the purpose of producing plants in order
• be necessary and essential to the finished
to prevent soil erosion on land devoted to
product or service,
agricultural use; ...”
• be used in or on the finished product or service,
• become a physical part of the finished product
Therefore all the components of a shelter belt or wind
or service, and
break planted on agricultural land are exempt from sales
• become an ingredient or compound part of
tax. The trees, fertilizers and pest control chemicals,
property or service for retail sale.
and any services purchased to plant the trees are not
taxable.
This exemption, found at K.S.A. 79-3606(m) and
This exemption is ONLY for those soil erosion projects
further explained and defined by K.A.R. 92-19-54, is
on “land devoted to agricultural use.”
available to many types of businesses. The statutory
definition specifically includes these examples for the
A farmer is buying 10 trees to plant on
agricultural industry:
the north side of his residence as a
windbreak. Since the land use is
Seeds, seedlings and fertilizer used in the
residential rather than agricultural, the
production of plants and plant products
farmer must pay sales tax on the purchase of the 10
produced for resale, and
trees. (The labor in this situation is not taxed because it
is performed on residential property. See Residential
Feed for animals, fowl and aquatic plants and
Labor Services on page 11.)
animals, the primary purpose of which is the
production of food for human consumption;
RESALE EXEMPTION
the production of animal, dairy, poultry or
aquatic plant and animal products, fiber or fur;
or the production of offspring for use for any
Perhaps the most widely used sales tax exemption
such purpose.
is for the purchase of items (inventory) intended for
resale. Those engaged in agribusiness are often
retailers as well as producers of agricultural products.
CAUTION: The seed, fertilizer and feed must
(See also Retail Sales by Agribusiness on page 22.)
meet the intended use portion of the definition
cited above (i.e., for agricultural animals or
When buying your inventory from a wholesaler or
plants) in order to be exempt.
another retailer, or selling inventory items to another
retailer, you must use a Resale Exemption Certificate
Whether a purchase qualifies for this exemption is
(ST-28A). In order to use a resale exemption certificate,
determined SOLELY by how the item is used in the
the buyer must have a Kansas sales tax account number
production activity. An item may be taxable for one use
and the items purchased must be for resale in the usual
and exempt for another use, even though purchased
course of the buyer’s business.
by the same consumer. Each transaction must therefore
be separately measured against the definition and
A Christmas tree farm not only grows and
guidelines in the law and regulation to determine the
sells Christmas trees, but also sells tree
taxability of the transaction.
stands, lights and prefabricated yard
ornaments. As a registered retailer, it will
Seeds and fertilizer for a home garden or
purchase the stands, lights and other retail items without
flower bed are taxable, while wheat and
sales tax using a resale exemption certificate.
pumpkin seeds purchased to produce a
crop for sale are exempt. Food,
A co-op sells fertilizer, feed, tools, tires,
supplements and vitamins for animals or fish that are
batteries and other automotive supplies.
pets or pleasure animals are taxable.
As a registered retailer the co-op will use
a resale exemption certificate to purchase
its inventory of these items without sales tax.
Containers, Labels and Shipping Cases
Included in the definition of items that are
INGREDIENT OR COMPONENT PART EXEMPTION
considered to be ingredient or component
parts are containers, labels, and shipping
Kansas sales tax is designed to be paid only once
cases used to sell or distribute property produced for
by the final consumer or user. Therefore, items that
sale. To be exempt, the container or other shipping or
become part of a finished product or taxable service to
handling materials must actually accompany the product
be sold to the final consumer are exempt as ingredient
and must not be returned for reuse by the manufacturer
or component parts. To be considered an ingredient or
compound part the item must:
or producer.
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