Economic and Marketing Information
FOR INDIANA   FARMERS
Prepared by the Agricultural Staff of Purdue University, Lafayette, Indiana
The Farmer and The Indiana Sales Tax
by R. N.  Weigle and J. 0. Dunbar, Agricultural Economics
November  30,   1964
In recent action, the Indiana Department of Revenue
has greatly clarified the Sales Tax as it applies to farmers.
In general, on sales of tangible personal property to
farmers the sales tax does not apply if the tangible personal property is directly used in production of food
or other agricultural commodities which are to be sold.
Thus, on all other items they pay the sales tax.
Purchases Exempt From Tax
When the purchaser of tangible personal property is
a farmer, as hereinafter defined, the following transactions are considered to be exempt from the retail
sales and use tax:
1. Livestock and poultry to be used for production
for human consumption, and breeding stock for such
purposes.
2. Feed and medicine sold for livestock and poultry
described in item 1.
3. Seeds, plants, fertilizers, fungicides, insecticides,
herbicides and rodent control.
4. Implements used in tilling of land and harvesting
of crops therefrom, such as plows, discs, cultivators and
self-propelled combines and corn pickers.
5. Portable feed troughs, waterers, feeders, livestock
houses and grain storage equipment.
6. Coolers, heaters, milking machines, fillers and
strainers, and containers used in the sale of farm
products.
7. Tractors and attachments therefor used solely for
farm production.
8. Gasoline, other fuel and oil for farm tractors and
other exempt farm machinery and implements.
9. Grease, greasing devices, and repair parts necessary for servicing of exempt equipment.
10. Heat lamps and other special lights used in
farm production.
11. Portable  pumps  and  related equipment.
For the tangible personal property listed above to be
exempt from the sales and use tax, it must be purchased
and owned by the former. If the farmer leases such
property, the actual owner must pay the sales or use
tax on it.
If a farmer makes a purchase tax exempt and later
determines that the purchase should have been taxable,
the state use tax in the amount of 2 percent of the purchase price should be remitted to the Department of
Revenue.
Purchases on Which Farmers Pay
The sales or use tax applies on the purchase price of
tangible personal property, if the farmer does not put
it into direct use in production of agricultural products
for sale. Thus, if the purchased property is used in the
production of agricultural products consumed by the
farmer or on a hobby farm, if the tangible personal
property is to become permanently affixed to and becomes a part of real estate, or if it is used to maintain
or repair real estate, it is subject to the 2 percent sales
tax. Thus the following items would be considered taxable
transactions to farmers as previously defined in the above
paragraphs:
Fences, posts, gates and fencing materials.
Drains, tiling, ditchers and graders.
Paints and brushes, garden and lawn equipment, all
tools, including forks, shovels, and hoes, all saws.
Any motor vehicles which are required by the motor
vehicles law to be licensed for highway use (except tractors used solely  for farm production).
Permanent  water  supply  systems,  permanent  pumps.
Refrigerators, freezers, and other household appliances.
Parts and supplies for noncommercial use.
All items of personal apparel, including footwear.
Any tangible personal property permanently attached
which becomes a part of real estate.
Any materials used in the construction or repair of
permanent: buildings, silos, grain bins, corn cribs, barns,
houses or any other permanent structure. Any replacement, repair or accessories for the above items.
Sales by Farmers
For normal sales that a farmer makes of his production to wholesale outlets, such as livestock at livestock
markets and grain elevators, the collection of the sales
tax by the farmers is not required. However, when the
farmer makes retail sales to consumers, such as eggs,
meat, fruit, vegetables and melons either by route, at
a roadside stand or by other methods of direct selling,
the farmer is selling retail as a retail merchant. He must
then register with the Indiana Department of Revenue,
obtain a retail merchant certificate, and collect the sales
tax on the sale to the consumer and remit the same to
the State Department of Revenue.
Electricity And Telephone Bills
Farmers do not ordinarily qualify to claim an exemption on electric or other utility bills unless the amount
of electricity used in direct agricultural production is
separately metered. When separate meters are not used,
to qualify for an exemption, the farmer must be prepared to prove that the predominant use  (50.1 percent