Generally, Ohio sales and use tax is not imposed upon tangible personal property used or consumed directly in agricultural activities. R.C. 5739.02(B)(42)(n). Similar to the manufacturing exemption, the following items purchased by persons engaged in farming, agriculture, horticulture or floriculture are exempt from Ohio sales / use tax:
- Items to be incorporated into tangible personal property produced for sale;
- Items used or consumed directly in producing tangible personal property for sale;
- Items used or consumed directly in producing, or incorporated into, tangible personal property which will be used directly in producing products for sale;
- Items used or consumed in conditioning or holding products produced for sale; and
- Products used to cultivate or stimulate growth of crops or flowers to be sold.
O.A.C. § 5703-9-23. Where a direct use in the agricultural activity is required, the item’s particular use is crucial as it must directly act upon the product being produced for sale. Ohio Tax Comm’r Opinion 93-0004 (Aug. 26, 1993). The agriculture exemption is consistent with the overriding intent of sales and use taxes to tax sales to consumers or end-users, but not property used in producing, or in this case growing, such consumer products.
Notwithstanding, property incorporated into real property is not exempt from Ohio sales / use tax. For example, irrigation pipes purchased and installed by a farmer and building materials incorporated into a storage silo for agricultural products are subject to tax because the items become real property upon installation. However, likely through successful lobbying efforts, portable grain bins, field tile, and livestock and horticulture structures, and items incorporated into such structures, are exempt from tax. Ohio Information Release ST 2002-02 (Issued April 2002; Revised May 2007).
Please contact us if you need help determining which items are entitled to the agriculture exemption.