Navigate Up
Sign In
Last Updated: 5/2/2017

Materials Consumed in Agricultural Production

Agricultural producers may purchase some items exempt from tax. This exemption applies to items used or consumed in the production process, whether or not they become part of the product produced.

To purchase these items exempt, you must give your supplier a completed Form ST3, Certificate of Exemption. Specify the Agricultural Production Exemption. For specific examples see below.

Chemicals

Chemicals may be taxable or exempt, depending on how they are used in agricultural activities. See the table below for more information.

How is the chemical used?

Is it taxable?

To fertilize agricultural crops or control weeds, disease, and insect infestation.

No

To control or eradicate animal diseases. Includes insecticides, pesticides, and rodenticides for the health and protection of agricultural and other nontaxable animals.

No

To clean or sanitize food processing machinery or equipment.

No

​Disinfectants (not merely additives of detergents) applied to agricultural and nontaxable animals, or used in disinfecting their environment.

Example: Disinfectants applied to dwellings to control or eradicate animal disease or pests.

No

To clean animal dwellings (detergents or other chemicals).

Yes

Chemicals used for odor control.

Yes

Fertilizers, herbicides, and insecticides for home, garden, or lawn use.

Yes

Fuel and electricity used in production

Fuels, electricity, gas, and steam used or consumed in agricultural production are not taxable. For specific exemptions see below.

How is the fuel, gas, electricity, or steam used?

Is it taxable?

To heat, cool, light, and ventilate facilities where agricultural animals are housed.

No

For general space heating, lighting farm buildings that do not house agricultural animals, or to operate a yard light.

Yes

For more information, see Revenue Notice 07-01, Utilities – Agricultural Production Animals.

Grain Drying

Fuels, electricity, gas, and steam purchased for grain drying are exempt as part of the agricultural production process until the grain reaches a sellable state or can be comingled with other grain.

Note: For grain drying, this exemption applies to grain elevator operators or other third parties regardless of when title to the grain passes.

Fuels, electricity, gas, and steam used in the storage of grain are not part of the agricultural production process and are taxable. This includes the aeration of grain to prevent spoilage, control insects, or to reduce dust and sweating.

For more information, see Revenue Notice 08-01, Agricultural Production – Grain Drying.

Shared utility meters

If an agricultural building shares utilities on one meter with a residential home or other non-qualifying building, you may need to perform an energy study to determine the exemption percentage.

For more information, see Fact Sheet 129, Utilities Used in Production.

Packaging materials

Nonreturnable packaging materials are not taxable. Examples include:

  • Berry boxes
  • Egg cartons
  • Paper bags

Returnable containers used to package food products are not taxable. Examples include:

  • Milk cans

Returnable containers used to package non-food items are taxable.

Plants and seeds

Plants and seeds used in agricultural production are not taxable. For example, seed to grow crops for sale or as feed for agricultural animals.

Plants and seed used for home vegetable gardens, lawns, or flower beds are taxable.

Nurseries and greenhouses

Nursery and greenhouse operations that grow trees, shrubs, perennials, annuals, potted plants, and other plants for sale qualify for the Agricultural Production Exemption.

For more information, see Fact Sheet 121C, Nursery and Greenhouse Production.

Federal and state programs

Feed, seeds, trees, fertilizers, and herbicides purchased for use by farmers in a federal farm, state farm, or conservation program are not taxable.

Equipment used for this purpose does not qualify for the Farm Machinery Exemption. For more information, see the Machinery and Equipment section.

Waste Treatment

There is an exemption for chemicals, materials, and supplies used in treating waste generated as a result of the agricultural production process.

For more information, see Fact Sheet 145, Industrial Production.

< Animals   Machinery and Equipment >
Return​​​​ to contents page for this guide