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For more information: Jan Talley, Director, or Jane Page, Assistant Director
Business Tax Division, 605.773.3311
(PIERRE, SD) – Sales tax exemptions implemented earlier this year for farm and irrigation equipment appear to be causing confusion in the agricultural community, according to officials with the South Dakota Department of Revenue and Regulation.
As of Jan. 1, the sale of parts and repair services for farm and irrigation equipment became exempt from sales tax; an exemption for maintenance items for farm and irrigation equipment went into effect March 3. Jan Talley, Director of the Business Tax Division, says although the law is very specific on what qualifies for the tax exemption, the department has been receiving numerous calls from farmers and retailers who mistakenly believe everything is exempt from the tax.
“It’s important that both farmers and retailers realize there are limits to these tax exemptions, and the sale must meet certain criteria for it to be exempt from tax,” Talley said.
According to Talley, the sales tax exemption applies to the following:
• Parts that replace a part used on farm machinery, attachment units, and irrigation equipment which have a specific or generic part number assigned by the manufacturer.
• Repair work performed on farm machinery, attachment units, and irrigation equipment.
• Maintenance items purchased to be used on farm machinery, attachment units, and irrigation equipment. Such items would include antifreeze, batteries, belts, detailing or cleaning, hoses, tires, nuts and bolts, oil, and windshield washer fluid. If the items are purchased to be used on equipment not classified as farm machinery, attachment units or irrigation equipment, sales tax applies at the state rate of 4% as well as applicable city tax.
To be classified as farm machinery, the equipment must be a portable mechanical unit used directly and mainly on agricultural land to produce agricultural products; tractors, combines, balers and fertilizer spreaders qualify. Attachment units are defined as a part or combination of parts that are attached to farm machinery or other agricultural equipment used for farming, such as cultivators, disks, and plows. Irrigation equipment includes pumps, pipe fittings, valves, sprinklers, and other equipment necessary to the operation of an irrigation system. Farm trucks, pickups, cars and other vehicles licensed by the State of South Dakota are not considered to be farm machinery so parts, repairs, and maintenance items purchased for them are subject to sales tax.
Talley reminds farmers and retailers that the sales tax exemption also does not extend to purchases of clothing, tools, twine and mesh used for baling, fencing supplies, other equipment or supply items, even if they are used on the farm for agricultural purposes. State and applicable municipal sales tax is still applied to these items.
People having questions on the tax exemptions are encouraged to contact the Department of Revenue and Regulation’s toll-free helpline at 1-800-829-9188 or visit the website at www.state.sd.us/drr.
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