Form Pub. Ks-1550 - Kansas Business Taxes For The Agrcultural Industry Page 9
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32Examples of exempt component parts include:
The retail sale of weed herbicides which
are sprayed or applied to crops, crop land,
• Paper or plastic bags for produce sold at a
pasture grass and/or range land grass
farmer’s market;
used for grazing commercial livestock, are
• Pots, crates and other containers sold with
exempt from sales tax as consumed in production.
plants, shrubs or trees;
Lubricating oils and greases, antifreeze
• Jars, lids and labels for honey, jams and jellies; or
and hydraulic fluids for a harvester are
• Bottles and labels for wine produced at a winery.
exempt. These same items purchased for
your cattle truck are taxable.
IMPORTANT: Boxes, crates and flats used to
transport agricultural products that are
returned to and/or retained and reused by the producer
are taxable.
INDUSTRY APPLICATIONS
AND EXAMPLES
CONSUMED IN PRODUCTION EXEMPTION
Another exemption available to many types of
Although Kansas sales tax laws and regulations
Kansas businesses is the exemption for items that are
contain definitions and specific examples for the
consumed in a production process. This exemption is
agricultural industry, they remain general in nature. This
found at K.S.A. 79-3606(n) and in K.A.R. 92-19-53. A
section will illustrate the practical application of the sales
production process is defined as:
tax principles previously discussed to selected segments
of agribusiness.
• producing, manufacturing, processing, mining,
drilling, refining or compounding tangible
Most of these examples are taken from written
personal property;
departmental advice in notices and private letter rulings
• the treatment of by-products or wastes from
available to the general public as part of the Policy
any such production process;
Information Library on our web site. If you are in doubt
• the providing of taxable services,
about the application of the law to a specific purchase
• the irrigation of crops, or
or situation for your business, contact the department
• the storage and processing of grain.
for advice. See Taxation Resources, page 24.
To be exempt as consumed in production, the item
ANIMALS AND ANIMAL CARE
must meet these four criteria. It must be:
1) used in the actual process;
G
R
: A
ENERAL
ULE
NIMALS USED IN PRODUCTION OR
2) essential or necessary to the process;
.
BREEDING OPERATIONS ARE EXEMPT
3) consumed, depleted or dissipated within
one year; and
If the animal is exempt as an agricultural animal
(defined on page 4), the feed and care vitamins and
4) not reusable for such purpose.
chemicals, whether fed, injected, applied or otherwise
used on animals for agricultural production are also
Like the exemption for ingredient or component parts,
exempt.
it is not the buyer or the item itself that is exempt, but
rather how the item is used in a production process
Bull Semen. The purchase of semen by persons
that may qualify it for exemption. The law lists the
engaged in the business of breeding and raising cattle
following agricultural examples to illustrate this
for ultimate resale is exempt as an ingredient or
exemption.
component part. The delivery charge is exempt if the
item purchased is exempt.
• Insecticides, herbicides, germicides, pesticides,
fungicides, fumigants, antibiotics, biologicals,
Insemination Service. The gross receipts from the
pharmaceuticals, vitamins and chemicals for use in:
service of performing insemination services in
commercial or agricultural production,
connection with production of cattle, sheep, hogs or
processing or storage of fruit, vegetables,
other breeding stock for resale is exempt.
feeds, seeds, grains, animals or animal
products whether fed, injected, applied,
Artificial Insemination Supplies. The following
combined with or otherwise used;
items are exempt as consumed in production:
• electricity, gas and water; and
Disposable plastic gloves, lubricants and paper toweling.
Catheters and ear tags are exempt as farm machinery
• petroleum products, lubricants, chemicals,
and equipment.
solvents, reagents and catalysts.
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