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Materials Consumed in Agricultural Production

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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.

The following are examples of items you may purchase exempt.

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.

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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 [+]

Petroleum Products [+]

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 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 Machinery and Equipment.

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 Industrial Production.

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