1. No category

FACT SHEET
Agriculture and Natural Resources
OAM-2-12
Ohio Agricultural Sales Tax
Exemption Rules
Chris Bruynis, PhD
Assistant Professor and Extension Educator
Ohio State University Extension
[email protected]
Introduction
Farmers have been exempt from Ohio sales tax
on purchases used for agricultural production for
several decades. However, this does not make all purchases by farmers exempt. Currently, Ohio sales tax
is charged on all sales of tangible personal property
and services unless there is an exception to this tax.
Farming is one of the exceptions. Since the majority
of exceptions or exemptions from the Ohio sales or
use taxes are based on the use of the items or services
purchased, it would be difficult for the Department
of Taxation to provide a list of taxable and exempt
items or services. For a farmer to claim exception or
exemption, the farmer must be using the items or
services in a manner eligible for the tax exemption.
Farming Defined
Farming is defined as the occupation of tilling
the soil for the production of crops and the raising
of farm livestock, bees, or poultry as a business. The
tax rules further broaden the definition of farming
to include agriculture, horticulture, and floriculture.
Agriculture is the cultivation of the soil for the purpose of producing grain, vegetables, and fruits, and
it includes gardening or horticulture, together with
the raising and feeding of cattle or stock for sale as
a business. Horticulture includes the production of
vegetables, vegetable plants, fruits, or nursery stock
and the operation of commercial vegetable greenhouses or nurseries. The production of flowers and
plants for sale as a business, either in the field or in
a greenhouse is considered floriculture.
Purchases That Are Ohio Sales Tax Exempt
Ohio tax rules provide some broad categories of
purchases that are tax exempt for farmers. Typically,
tangible personal property used in farming is exempt
while real property is not exempt from sales tax.
Tangible personal property refers to property—except land or buildings—that can be seen, weighed,
measured, felt, touched, or otherwise perceived by
Copyright © 2012, The Ohio State University
Ohio Agricultural Sales Tax Exemption Rules—page 2
the senses. Real property is considered property that
includes land, buildings, and anything affixed to the
land. Exemptions for farmers include all of the following purchases:
• The purchase of articles for the purpose of incorporating them into tangible personal property to
be produced for sale.
• The purchase of articles to be used or consumed
in farming directly in producing tangible personal
property for sale.
• The purchase of articles for resale. A sales tax
resale certificate should be obtained, especially
if purchasing items from a wholesale company.
Virtually all legitimate wholesale companies will
ask for a resale certificate before they will sell at
wholesale prices.
• The purchase of portable grain bins, field tile,
single-purpose livestock buildings, and singlepurpose horticultural buildings. A portable grain
bin is defined as a structure that is or will be used
by a person engaged in farming or agriculture to
shelter the person’s grain. The bin also has to be
designed to be disassembled without significant
damage to its component parts.
Examples of purchased items that would qualify for
tax exemption include tractors, plows, combines, and
specially designed motor vehicles with PTO applicator
units that travel from farm to farm to apply chemicals
and fertilizers, seeds, fertilizers, insecticides, pesticides, and farm input and supplies including freezers,
portable storage containers, crates, and gates. This is
not a complete listing as it would be impossible to
list every item that would qualify for Ohio sales tax
exemption. The taxability or nontaxability of sales
is determined by the use of articles sold. For the sale
to be exempt, it is necessary that the articles sold be
used in an exempt manner as defined above.
Purchases That Are Not Sales Tax Exempt
Farmers should understand the difference of items
being Ohio sales tax exempt and being tax deductible. Many of the following business items’ use can be
deducted from income taxes, but they are still subject
to Ohio sales tax. Here are categories of items that
farmers typically purchase that do not qualify for the
tax exemption:
• Tangible personal property that is not incorporated
in products being produced for sale nor consumed
directly in products being produced for sale.
Examples include most motor vehicles licensed
to operate on the highway: passenger cars, pickup trucks, and larger trucks and trailers that are
primarily used to haul people, animals, farm supplies, and farm products. Other items that may be
used on the farm but do not qualify as tax exempt
are lawn mowers, weed eaters, chain saws, home
garden equipment, all-purposes vehicles that are
primarily used for recreation, and items used to
maintain set-a-side fields. Office equipment, office
supplies, educational material, furniture, etc. are
not incorporated in the products being produced
for sale nor are they used or consumed directly in
producing the items for sale. They are, therefore,
taxable. Mere use of an item during a farming
activity does not necessarily mean that it is used
directly in producing an item for sale. Direct use
means that the purchased item directly acts upon
the product being produced for sale.
• Items incorporated into real property are also
deemed taxable. This includes but is not limited
to fencing, irrigation pipes, lumber, nails, glass,
and similar items to be used in the construction
or repair of real property. Exceptions to this rule
are provided for portable grain bins, field tile,
and single-purpose livestock and horticultural
buildings.
Responsibility of Determining Tax Exemption
All sales are presumed to be taxable until the
contrary is established. If a farmer wants to claim
exception or exemption from sales tax based on the
use of the goods or services purchased, the farmer
must provide a properly completed exemption certificate (unit or blanket) to the seller of those goods
or services. If a farmer has provided a valid blanket
exemption certificate and is purchasing an item to be
used in a taxable manner, he or she should instruct
the seller to charge sales tax on that particular purchase. Unless the seller fraudulently fails to collect the
tax or solicits a farmer to participate in an unlawful
claim of exemption, the seller is relieved of the duty
to collect sales tax on any sale covered by a fully
Copyright © 2012, The Ohio State University
Ohio Agricultural Sales Tax Exemption Rules—page 3
completed certificate. However, if the Ohio Department of Taxation feels that an exemption has been
erroneously claimed by the farmer, they will contact
the farmer and obtain additional information that
justifies the claimed exemption or payment of the
tax, plus applicable penalties.
How to Claim Exempt Status
Farmers need to obtain either form STEC U (Sales
and Use Tax Unit Exemption Certificate) or STEC B
(Sales and Use Tax Blanket Exemption Certificate)
at http://tax.ohio.gov/forms/index.stm. The blanket
certificate is used when dealing with a vendor where
multiple purchases will be made over time while the
unit certificate is used for a one time purchase from a
vendor. A completed form requires the vendor’s name,
the reason claimed for the sales tax exemption, and
the purchaser’s name, address, signature, date, and
vendor’s number, if the purchaser has one. An example
reason for the purposes of completing the form could
read “purchases used for agriculture, horticulture, or
floriculture production.” It is the buyer’s responsibility to provide the form to the vendor, although many
vendors who frequently deal with farmers have blank
forms available either in paper copy or electronically.
Summary
Determining whether or not a purchase is Ohio
sales tax exempt is not always easy. Taking time to
think about whether the purchased item meets the
guidelines outlined by the Ohio Revised Code and
Ohio Department of Taxation will help in making
that determination. If the decision is not clear,
either pay the tax on the purchase or if time allows,
e-mail the Ohio Department of Taxation for a
ruling.
References
Ohio Department of Taxation. 2010. 2010. ST 201001—Sales and Use Tax: Food Service—Equipment
and Supplies Used in the Food Service Industry.
Accessed April 11, 2012. http://tax.ohio.gov/divisions/communications/information_releases/
sales/st_2010_01.stm.
Ohio Department of Taxation. 2010. Tax Rules: Final:
5703-9-03, Sales and Use Tax; Exemption Certificate
Forms. Accessed April 10, 2012. http://tax.ohio.gov/
divisions/legal/rules/final/5703_09/5703_09_03.
stm.
Ohio Department of Taxation. 2007. ST 2002-02,
Portable Grain Bins, Field Tile, Livestock Structures,
Horticulture Structures. Accessed April 11, 2012.
http://tax.ohio.gov/divisions/communications/
information_releases/sales/ST200202.stm.
Ohio Department of Taxation. 1993. Opinion of the
Tax Commissioner, Opinion No: 93-0004. Accessed
April 10, 2012. http://tax.ohio.gov/divisions/legal/
documents/93ST_Opinion930004_RWT.pdf.
Ohio Department of Taxation. 1962. Tax Rules: Final: 5703-9-23, Personally Used or Consumed in
Farming, Agriculture, Horticulture or Floriculture.
Accessed April 10, 2012. http://tax.ohio.gov/divisions/legal/rules/final/5703_09/5703_9_23.stm.
Wright, P., D. Sassen, and N. Still. Ohio Sales Tax
Guidelines for Agribusiness and Farm Managers.
Columbus, OH: The Ohio State University, 1987.
Visit Ohio State University Extension’s web site “Ohioline” at: http://ohioline.osu.edu
Ohio State University Extension embraces human diversity and is committed to ensuring that all research and related educational
programs are available to clientele on a nondiscriminatory basis without regard to age, ancestry, color, disability, gender identity or
expression, genetic information, HIV/AIDS status, military status, national origin, race, religion, sex, sexual orientation, or veteran
status. This statement is in accordance with United States Civil Rights Laws and the USDA.
Keith L. Smith, Associate Vice President for Agricultural Administration; Associate Dean, College of Food, Agricultural, and
Environmental Sciences; Director, Ohio State University Extension; and Gist Chair in Extension Education and Leadership.
For Deaf and Hard of Hearing, please contact the College of Food, Agricultural, and Environmental Sciences using your preferred
communication (e-mail, relay services, or video relay services). Phone 1-800-750-0750 between 8 a.m. and 5 p.m. EST Monday
through Friday. Inform the operator to dial 614-292-6891.
Copyright © 2012, The Ohio State University