Do ostriches, emus, and rheas (ratites) raised for slaughter qualify for the same Alabama tax breaks as 'poultry' — the sales/use tax exemptions, the reduced machinery rate, and the ad valorem exemption?

Plain-English summary

Organization A asked how Alabama taxes the ratite industry — the agricultural business of breeding and raising ostriches, emus, and rheas (collectively "ratites," a group of flightless birds) for slaughter, to produce meat and other by-products for market.

The Department's answer turns on a definition. Ala. Code § 2-17-1(4) defines "poultry" as any live or slaughtered domesticated bird. Because that statutory definition covers any bird, the Department treats ratites (ostriches, emus, rheas) as poultry — which means they get the same favorable tax treatment Alabama already gives the poultry industry.

The ruling then walks through what that treatment includes:

Sales tax (§ 40-23-4(a)) — exemptions for:

• feed for livestock and poultry (subd. (4));
• poultry and poultry products that are products of the farm and sold by the producer (subd. (5));
• packing materials used in preparing poultry and eggs for market (subd. (20));
• drugs, hormones, medicines, and vitamins used in the commercial production of poultry (subd. (21)); and
• wood shavings used as "chicken litter" by poultry producers (subd. (28)).

Use tax: parallel exemptions apply under § 40-23-62.

Reduced machinery rate: § 40-23-37 sets a special 1½% sales-tax rate on machinery and equipment used in producing poultry on farms.

Ad valorem (property) tax:

• All poultry are exempt from ad valorem tax under § 40-9-1(16);
• farm tractors and implements used exclusively in an agricultural operation are exempt under § 40-9-1(22);
• stock of goods and inventory for sale are exempt under § 40-9-1(23);
• land and buildings used to raise/breed poultry are Class III property (assessed at 10% of market value) and industrial facilities for slaughter/processing/distribution/marketing are Class II (assessed at 20%) under § 40-8-1, with the ad valorem rate being whatever applies in the local taxing jurisdiction.

Holding: ostriches, emus, and rheas (ratites) are included within the term "poultry" for taxation purposes and are entitled to the same treatment as the poultry industry in Alabama.

What this means for you

Ratite farmers get the poultry tax breaks

If you breed or raise ostriches, emus, or rheas for slaughter in Alabama, the Department treats your birds as poultry. That means the sales/use tax exemptions for feed, farm-produced birds sold by the producer, packing materials, production drugs/vitamins, and litter apply, along with the 1½% reduced rate on poultry-production machinery and the ad valorem exemption for the birds themselves.

The exemptions are specific — match each purchase to a subdivision

Alabama's agricultural exemptions are itemized (feed, packing materials, medicines, litter, etc.), and the § 40-23-4(a)(5) exemption for the birds/products is limited to items that are products of the farm sold by the producer. Track your purchases and sales against the specific subdivisions rather than assuming everything "farm-related" is exempt.

Property is classified by use

Your raising/breeding land and buildings are assessed as Class III (10%), but a slaughter/processing/marketing facility is Class II (20%) under § 40-8-1 — and the actual bill depends on the local millage where the property sits. Classify each parcel by how it's actually used.

It's a definition-driven ruling, still not precedent

The result flows from the broad § 2-17-1(4) definition of "poultry." Even so, under § 40-2A-5 this ruling is not precedent and binds the Department only as to Organization A. Other farmed birds or different facts should be confirmed separately.

Common questions

Q: Are ostriches, emus, and rheas "poultry" for Alabama tax purposes?
A: Yes. Because Ala. Code § 2-17-1(4) defines poultry as any live or slaughtered domesticated bird, the Department includes ratites within "poultry," so they receive the same sales/use and ad valorem tax treatment as the poultry industry.

Q: What sales-tax exemptions apply to raising ratites?
A: The § 40-23-4(a) poultry exemptions — feed, farm-produced birds/products sold by the producer, packing materials, production drugs/hormones/medicines/vitamins, and wood-shavings litter — plus parallel use-tax exemptions under § 40-23-62.

Q: Is there a break on equipment used to raise the birds?
A: Yes — § 40-23-37 provides a reduced 1½% sales-tax rate on machinery and equipment used in producing poultry on farms.

Q: How is the property taxed?
A: The birds are exempt from ad valorem tax (§ 40-9-1(16)); farm tractors/implements (§ 40-9-1(22)) and inventory for sale (§ 40-9-1(23)) are exempt; raising/breeding land and buildings are Class III (10%) and processing facilities Class II (20%) under § 40-8-1, taxed at the local rate.

Q: Can I rely on this ruling?
A: No. Ala. Code § 40-2A-5 makes revenue rulings non-precedential; this one is limited to Organization A's facts.

Citations and references

Statutes:

• Ala. Code 1975 § 2-17-1(4) — defines "poultry" as any live or slaughtered domesticated bird
• Ala. Code 1975 § 40-23-4(a)(4),(5),(20),(21),(28) — sales tax exemptions for poultry feed, farm-produced poultry sold by the producer, packing materials, production drugs/vitamins, and chicken litter
• Ala. Code 1975 § 40-23-62 — parallel use tax exemptions
• Ala. Code 1975 § 40-23-37 — reduced 1½% sales-tax rate on farm machinery used in poultry production
• Ala. Code 1975 § 40-9-1(16) — ad valorem exemption for all poultry
• Ala. Code 1975 § 40-9-1(22) — ad valorem exemption for farm tractors and implements
• Ala. Code 1975 § 40-9-1(23) — ad valorem exemption for stock of goods / inventory for sale
• Ala. Code 1975 § 40-8-1 — property classification (Class II/III) and assessment ratios
• Ala. Code 1975 § 40-2A-5 — revenue rulings are not to be used or cited as precedent

Source

• Landing page: Alabama Department of Revenue -- Revenue Rulings
• Original PDF: https://www.revenue.alabama.gov/wp-content/uploads/2022/06/2017_05_RR-93-009.pdf

Original ruling text

State of Alabama
Department of Revenue

Montgomery, Alabama 36132 GEORGE E. MINGLEDORFF Ill
Assistant Commissioner
GEORGE E. MINGLEDORFF Ill LEWIS A. EASTERLY
Commissioner Acting) Secretary

This document may not be used or cited as precedent. Code of
Alabama 1975, §40-2A-5(a).

FROM: Commissioner of Revenue
Alabama Department of Revenue

DATE: December 7, 1993

RE: Revenue Ruling 93-009

ISSUES AND FACTS

Organization A requests a ruling concerning the tax treatment
for breeding and raising for slaughter certain birds referred to

as ratites, which includes emus, ostriches and rheas. These
three types of birds are within the same flightless bird
category and are bred and raised for the same purposes. The

ratite industry in Alabama consists of the agricultural process
of breeding and raising ostriches, emus and rheas for slaughter
to obtain meat and other by-products for market.

The request for a revenue ruling asks for a ruling on the

taxation of the ratite industry under tax statutes administered
by the Alabama Department of Revenue.

LAW AND ANALYSIS

In general, most reference materials define “"ratite™ as any of a
group of flightless birds such as the ostrich or emu. See
American Heritage Dictionary, Second College Edition. Code
of Alabama 1975, 8$2-17-1(4) defines "youltry™ to be any live or
slaughtered domesticated bird. Since the statutory definition
of poultry includes any bird; the Department of Revenue
considers the group of flightless birds characterized as
ratites, which include ostriches, emus and rheas, as also being
entitled to the same favorable tax treatment given to "poultry"
under the tax statutes.

For sales tax purposes, Code of Alabama 1975, 840-23-4(a)
provides exemptions for poultry as follows:

(4) Exempts feed for livestock and poultry,

(5) Exempts poultry and poultry products
that are products of the farm and sold by
the producer thereof,

(20) Exempts packing materials used in
preparing poultry and eggs for market,

C21) Exempts drugs, hormones, medicines,
and vitamins used in the commercial
production of poultry,

(28) Exempts wood shavings used as ‘chicken
litter' by poultry producers.

Similar exemptions are found in the use tax statutes at
§40-23-62 and are also applicable.

Code of Alabama 1975, §40-23-37 also provides a special
reduced rate of one and one-half percent sales tax on machinery
and equipment used in the production of poultry on farms.

For ad valorem tax purposes, §40-9-1(16) exempts all poultry
from ad valorem taxation. The land and buildings used for
raising and breeding of poultry are classified as Class III
property and assessed at ten percent of market value under
§40-8-1, Code of Alabama 1975. Industrial facilities used for
the slaughter, processing, distributing and marketing of poultry
are classified as Class II property and assessed at twenty
percent of its market value under §40-8-1, Code of Alabama
1975. Farm tractors and farming implements, when used
exclusively in connection with an agricultural operation, are
exempt under §40-9-1(22), Code of Alabama 1975. The stock of
goods and inventory for sale are also exempt under §40-9-1(23).
The rate of tax for ad valorem purposes to be applied to any
taxable property is the rate applicable in the taxing
jurisdiction where the property is located.

HOLDING

Ostriches, emus and rheas, which are referred to as ratites, are
included within the term poultry for taxation purposes and, as
such, are entitled to the same treatment as received by the
poultry industry in the State of Alabama.

GEORGE E. MINGLEDORFY Ill