Sales Tax Exemption For Agricultural Repair Parts

Cornhusker Economics September 3, 2014

Sales Tax Exemption For Agricultural Repair Parts

Updated October 10, 2014

New Legislation
LB 96 was passed this year in the Nebraska State Legislature that will make the sales of all repair and replacement parts used to repair agricultural machinery and equipment exempt from sales tax.  This legislation went into effect on October 1, 2014
Any repairs made prior to October 1, 2014 will still be subject to sales tax.  Repairs prior to that date that must be capitalized (put on your depreciation schedule) are still eligible for a refund.  In other words, if you made a repair to a piece of farm equipment that substantially increased the value and life of the asset causing it to be classified as a capital purchase, you can file for a refund of the sales tax paid.  Prior to October  1, 2014, this is the only way to get repairs free from sales tax.

Qualifying Assets
For repairs to be exempt from sales tax, the repair must be done on agricultural machinery and equipment used in commercial agriculture.  To be defined as commercial agriculture, you "must be in the business of producing food products or other useful and valuable crops, or raising animal life."  This does include commercial production in greenhouses, nurseries, tree farms, sod farms and feedlots, but does not include commercial elevators or animals held in stockyards or sale barns.

The asset itself must also be a qualifying asset.  Those that qualify must be "tangible personal property that is used DIRECTLY in cultivating or harvesting a crop, raising or caring for animal life or collecting or processing an agricultural product on the farm or ranch".

This means assets such as four-wheelers, utility vehicles, lawn  mowers  and other farm  assets that are not  directly tied to production will not meet the exemption for sales tax.

The state has an information guide available with a list of items that do and do not qualify for the sales tax exemption at the following link:
http://www.revenue.nebraska.gov/info/6-368.pdf

Procedure
To be eligible for an exemption from sales tax, you must provide your vendor with a Nebraska Form 13.  You can find these at http://www.revenue.nebraska.gov by searching for "Form 13".  As the agricultural producer, you will be responsible for providing these to each vendor prior to purchases.  When you are completing the form, you can designate whether this is a single purchase or a blanket.  If you select "Blanket", the certificate stays in effect until you notify the vendor in writing that it needs to be revoked.  You must also select "Exempt Purchase" and complete Section B of the form.  You will also mark that you are exempt based on Category 2.  For most repairs, you will select that "No" the tax was not paid when purchased and "No" the item was not depreciable.

There will likely be some adjustments as this law takes effect, but it should be a fairly simple adjustment after you have issued the Form 13 to all your vendors.

Tina Barrett
(402) 464-6324
Executive Director
Nebraska Farm Business, Inc.
tbarrett2@unl.edu