Are soaps, acids, sanitizers, teat dips, and similar chemicals used by Illinois dairy farmers exempt farm chemicals?

Plain-English summary

Chemicals used by dairy farmers were not automatically exempt. The result depended on whether the chemical was used in qualifying production agriculture and, for animal disinfectants, whether it was applied directly to livestock.

Dairy production qualified

Raising dairy cows to produce milk for sale for human consumption qualified as production agriculture under 35 ILCS 120/2-35.

Farm chemicals generally included chemical products used in production agriculture or in producing or caring for animals that would be sold or whose products would be sold.

Direct animal use versus facility cleaning

Animal disinfectants could qualify only when applied directly to livestock, externally or internally.

Chemicals and disinfectants used for general farm maintenance did not qualify. Neither did products used to clean milking machines or pipelines.

The GIL therefore did not grant one blanket exemption for all soaps, acids, sanitizers, teat dips, and other dairy products sold by the requester.

What this means for you

Dairy farmers and suppliers

Document the use of each chemical. A product applied to the animal can receive different treatment from the same or similar product used on equipment or facilities.

Sellers accepting an exemption

Do not rely only on the purchaser's status as a dairy farmer. Confirm the chemical and its exempt production-agriculture use.

Common questions

Q: Is raising dairy cows for milk production agriculture?
A: Yes when the milk is produced for sale as food.

Q: Are chemicals used to clean milking machines exempt farm chemicals?
A: No under this GIL.

Q: Can an animal disinfectant qualify?
A: Yes when applied directly to livestock, internally or externally.

Citations and references

• 35 ILCS 120/2-35 — production agriculture, including animal husbandry.
• 86 Ill. Adm. Code 130.1955 — farm-chemical exemption and examples.

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2011.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2011/st-11-0066.pdf

Original ruling text

ST 11-0066-GIL 08/19/2011 AGRICULTURAL PRODUCERS & PRODUCTS
Farm chemicals qualify for sales tax exemptions pursuant to 86 Ill. Adm. Code 130.1955 (This
is a GIL.)

August 19, 2011

Dear Xxxxx:
This letter is in response to your letter dated July 27, 2011, in which you request information.
The Department issues two types of letter rulings. Private Letter Rulings (“PLRs”) are issued by the
Department in response to specific taxpayer inquiries concerning the application of a tax statute or
rule to a particular fact situation. A PLR is binding on the Department, but only as to the taxpayer
who is the subject of the request for ruling and only to the extent the facts recited in the PLR are
correct and complete. Persons seeking PLRs must comply with the procedures for PLRs found in the
Department’s regulations at 2 Ill. Adm. Code 1200.110. The purpose of a General Information Letter
(“GIL”) is to direct taxpayers to Department regulations or other sources of information regarding the
topic about which they have inquired. A GIL is not a statement of Department policy and is not
binding on the Department. See 2 Ill. Adm. Code 1200.120. You may access our website at
www.tax.illinois.gov to review regulations, letter rulings and other types of information relevant to your
inquiry.
The nature of your inquiry and the information you have provided require that we respond with
a GIL. In your letter you have stated and made inquiry as follows:
I am writing on behalf of COMPANY. Our company sells an assortment of chemicals
used by dairy farmers located in WI and IL. Soaps, acids, sanitizers, teat dips, etc. are
used to properly care for animals, as well as, sanitize facilities and equipment during
milk production.
Traditionally, COMPANY charges sales tax to IL farmers who purchase chemicals from
our service. Recently, some farmers have indicated such chemical sales are tax
exempt. Further, the farmers noted purchasing the same or similar products at local
‘big box’ retailers who do not charge sales tax on these products.
I contacted the IL Department of Revenue business hotline twice for clarification. I
spoke to 2 different agents who both felt chemicals used by dairy farmers are nontaxable. The references these agents sited [sic] are as follows:
1.)

IL Department of Revenue Regulations, Title 86: Revenue, Part
130: Retailers' Occupation Tax, Section 130.1955:
Farm
Chemicals, which states:
a.)

Effective October 1, 1975, vendors of farm chemicals
are exempt from Retailers' Occupation Tax on their
receipts from such sales.

b.)

2.)

Farm chemicals include any chemical product used in
production agriculture, the products of which are to be
sold, or in the production of care of animals that are to
be sold or the products of which are to be sold.
Examples of exempted items are stock sprays,
disinfectants and the like, stock tonics, serums,
vaccines, poultry remedies and other medicinal
preparations and conditioners, water purifying
products, insecticides, weed killers and the like. (For
a definition of production agriculture, see Section 2-35
of the Act.)

35 ILCS 120/2-35 Retailers' Occupation Tax Act, Section 2-35,
Production Agriculture, which states:
For the purposes of this Act, ‘production agriculture’ means
the raising of or the propagation of livestock; crops for sale
for human consumption; crops for livestock consumption;
and production seed stock grown for the propagation of feed
grains and the husbandry of animals or for the purpose of
providing a food product, including the husbandry of blood
stock as a main source of proving a food product.
‘Production agriculture’ also means animal husbandry,
floriculture, aquaculture, horticulture, and viticulture.
(Source: P.A. 91-51, eff. 6-30-99.)

I agree with the opinions of both agents. Dairy farmers are not identified specifically, but
the language in these references can be interpreted to include them. Generally
speaking,
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dairy farmers utilize farm chemicals in the production of milk
dairy farmers utilize farm chemicals to prepare and care for the animals
used to produce milk
soaps, acids, sanitizers and the like would qualify as disinfectants
animal care products like teat dips and others are used for medicinal
purposes, as well as, conditioning the animal during milk production
dairy cows are a form of livestock
dairy cows are raised for the purpose of milk production
milk is produced with the intent to sell for human consumption

Regardless, I am reluctant to stop charging sales tax on these items based on an
informal interpretation. Thus, I ask that you review these regulations, consider my
arguments, and provide a formal interpretation of the law as it applies to chemical sales
to dairy farmers. If the tax is due, then COMPANY will need to educate our customers
and sell harder. If the tax is not due, then COMPANY can stop charging our customers
with confidence.
Thank you for your attention to my request. I await your reply.

DEPARTMENT’S RESPONSE:
In general, the Illinois Retailers’ Occupation Tax is imposed upon the total gross receipts
received by retailers who make sales of tangible personal property to Illinois end users. Unless the
sales are specifically exempted, such retailers must collect and remit the sales tax. See 86 Ill. Adm.
Code 130.101. As you pointed out in your letter, Illinois provides an exemption for farm chemicals.
Specifically, the Department’s regulation at 86 Ill. Adm. Code 130.1955 is the regulation that explains
the exemption afforded farm chemicals. This regulation provides examples of the kinds of farm
chemicals that qualify for the exemption. In general, farm chemicals include chemical products used
in production agriculture, the products of which are to be sold, or in the production or care of animals
that are to be sold or the products of which are to be sold.
"Production agriculture" means the raising of or the propagation of livestock; crops for sale for
human consumption; crops for livestock consumption; and production seed stock grown for the
propagation of feed grains and the husbandry of animals or for the purpose of providing a food
product, including the husbandry of blood stock as a main source of providing a food product.
"Production agriculture" also means animal husbandry, floriculture, aquaculture, horticulture, and
viticulture. 35 ILCS 120/2-35. Thus, the raising of dairy cows for the production of milk that is to be
sold for human consumption as a food product would qualify as production agriculture.
This exemption is more restricted than it may appear. For example, chemicals such as animal
disinfectants can only qualify for the exemption if they are applied directly to livestock, either
externally or internally. Chemicals and disinfectants used for general farm maintenance or to clean
milking machines and pipe lines do not qualify for the farm chemical exemption.
I hope this information is helpful. If you require additional information, please visit our website
at www.tax.illinois.gov or contact the Department’s Taxpayer Information Division at (217) 782-3336.
Very truly yours,

Debra M. Boggess
Associate Counsel
DMB:msk