Can an airplane used for precision-agriculture crop imagery qualify for Illinois's farm machinery and equipment sales tax exemption?

Plain-English summary

A company bought six used airplanes, modified them (under an FAA supplemental type certificate) to carry multispectral camera systems, and flew them over farm fields roughly weekly from April through October. The imagery was processed into data-rich "prescription zones" and application maps that farmers then loaded into GPS-guided, variable-rate equipment like planters and chemical applicators, telling them what chemicals or fertilizer to apply, where, and in what amount. The company claimed the aircraft as exempt "farm machinery and equipment" under 86 Ill. Adm. Code 130.305, checking the "used primarily in production agriculture" box on its RUT-75 use tax form.

The Illinois Department of Revenue's answer was conditional rather than a flat yes. Illinois generally taxes sales of tangible personal property, but machinery and equipment used primarily in "production agriculture" is exempt. The statute (35 ILCS 120/2-35) and the regulation (86 Ill. Adm. Code 130.305(f)) spell out what counts: as to crops, production agriculture includes mapping fields and applying farm chemicals, along with tilling, planting, irrigating, cultivating, applying herbicide/insecticide/fertilizer, and harvesting/drying. It specifically does not include clearing land, mowing fence rows or ditches, building ponds or drainage, crop scouting, tile mapping, or storing/transporting crops.

The Department told the company that an aircraft used in production agriculture "may qualify" for the exemption if it is used primarily in one of the qualifying ways described above — but flagged that if the aircraft were instead used primarily for crop scouting or field-maintenance activities, it would not qualify, citing Compliance Alert 2007-03. The letter does not resolve, for this specific taxpayer, whether generating aerial imagery for prescription/application maps is "mapping fields" (qualifying) or closer to "crop scouting" (non-qualifying) — it leaves that line-drawing to how the aircraft is actually, primarily used.

What this means for you

Farmers and ag-tech businesses buying specialized equipment

If you buy or lease machinery — including something unconventional like an aircraft — for use in farming, the exemption turns on the equipment's primary use, not on the type of equipment itself. Equipment used mainly for qualifying activities (mapping fields, applying chemicals, tilling, planting, irrigating, harvesting) can qualify. Equipment used mainly for crop scouting, field maintenance, land clearing, or similar excluded activities cannot, even if it also supports farming in a general sense. You must certify the primary qualifying use to the seller to claim the exemption (86 Ill. Adm. Code 130.305(a)), so document how the equipment is actually used, not just how it's marketed.

Accountants and tax preparers

This GIL is a useful illustration of how thin the line can be between "mapping fields" (exempt-qualifying) and "crop scouting" (excluded), since both involve flying over fields to gather information about crops. The Department did not resolve that line for this taxpayer's precision-imagery use case — it simply restated the framework and pointed to Compliance Alert 2007-03 as an example of other equipment found to be used for non-qualifying scouting/maintenance activities. When advising a client on this exemption, focus fact-gathering on what the equipment's output is actually used for (e.g., generating variable-rate application maps vs. simply monitoring crop condition) and get a client-specific ruling if the answer isn't clear, since a GIL cannot be relied on as authority.

Common questions

Q: Did the Department decide that this company's aircraft qualify for the exemption?
A: Not definitively. The Department said an aircraft used primarily in production agriculture may qualify, but it did not conclude one way or the other whether this particular company's use (precision-agriculture aerial imagery for prescription/application maps) counts as qualifying "mapping fields" versus non-qualifying "crop scouting." The answer depends on the aircraft's primary use.

Q: What's the difference between "mapping fields" and "crop scouting" for this exemption?
A: The regulation lists mapping fields and applying farm chemicals as qualifying production-agriculture activities, while crop scouting and tile mapping are explicitly excluded. The GIL doesn't further define either term, so the distinction can be fact-specific — this letter itself flags that ambiguity by warning that an aircraft used primarily for crop scouting would not qualify.

Q: Can equipment as unusual as an airplane ever qualify as "farm machinery and equipment"?
A: Yes, in principle. The exemption is not limited to a fixed list of equipment types; it applies to machinery and equipment used or leased primarily in production agriculture, new or used. What matters is the primary use, not the category of equipment.

Q: Can I rely on this letter for my own aircraft or equipment purchase?
A: No. This is a General Information Letter (GIL), which merely points to the relevant regulations and is not a statement of Department policy or binding on the Department. If you need a binding answer for your specific facts, you would need to request a Private Letter Ruling (PLR).

Source

• Landing page: https://taxarchive.illinois.gov/research/legal/letter-rulings/sales-tax/2018.html
• Original PDF: https://tax.illinois.gov/content/dam/soi/en/web/taxarchive/research/legal/letter-rulings/sales-tax/2018/st-18-0043-gil.pdf

Original ruling text

ST 18-0043-GIL 12/06/2018 FARM MACHINERY AND EQUIPMENT
An aircraft used primarily in production agriculture may qualify for the farm machinery and equipment
exemption. See 86 Ill. Adm. Code 130.305. (This is a GIL.)
December 6, 2018
Dear Xxxx
This letter is in response to your letter dated November 7, 2018, in which you requested 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:
We recently purchased six previously-owned aircraft that will be used exclusively by our
company for the purpose of precision agriculture aerial imagery. Documentation was sent to the
State of Illinois Department of Transportation, Division of Aeronautics, including the ST-587,
RUT-75, AER 2048, US Department of Transportation of Bill of Sale and the US DOT Aircraft
Registration Application. On the RUT-75 form, I selected an exemption from tax under item “e”
used primarily in production agriculture. Per the advice of Xxxx of the Illinois Department of
Revenue, Audit Division, I am sending additional information to the Legal Services Office
supporting this request.
These airplanes (identified as ###, ###, ###, ###, ### and ###) will be fully engaged in
production agriculture through our company. The aircraft have been modified per FAA STC to
house proprietary multispectral camera systems which are used to acquire high resolution
imagery of production agriculture fields weekly during the entire growing season (10 to 14 flights
total) from April to October. The data acquired in each flight is immediately uploaded to the
cloud, and is processed through a sophisticated software analytics process. Analysis is
delivered to farmers the day after the flight via a web portal. The deliverable are not simple
photographs – they are data-rich images which provide quantitative information regarding crop
health and growth stages, and from which prescription zones are created. The zones are
integral to the farmer’s use of their precision ag equipment, enabling them to determine what
chemicals are needed, where they are needed, and what amounts are appropriate. These
zones allow farmers to develop application maps that are GPS-based using this data as an
input to their precision, variable-rate machinery. Without the data provided through this aerial
imagery service, they are unable to use the precision/variable-rate features on equipment such
as planters and applicators.
The usage of these airplanes and sensor systems is very different than that of earlier
generations of agriculture aerial photography, in which a farmer could simply obtain a bird’s-eye
perspective of their fields. The state-of-the-art multispectral systems provide a data rich
assessment of the crops, including strategic information to tailor planting strategies;
management of inputs such as fertilizer, herbicides, and pesticides, and harvest timing and
strategy. I have included with this letter a brochure from COMPANY so that you might learn
more about the services provided to farmers from the imagery we obtain for COMPANY. In

ST 18-0043-GIL
Page 2

addition, I have provided (below) a number of examples of the types of data provided to
farmers.
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 incur Retailers’ Occupation Tax on those sales. See 86 Ill. Adm. Code 130.101.
In certain cases, the sale of tangible personal property used in production agriculture is not subject to
Illinois Retailers’ Occupation Tax and Use Tax. Under 86 Ill. Adm. Code 130.305 “Farm Machinery and
Equipment,” Illinois sales tax does not apply to the sale of machinery and equipment, both new and used and
including that manufactured on special order, used or leased for use primarily in production agriculture or for
use in State or Federal agricultural programs. The sale of individual replacement parts for such machinery and
equipment is also exempt. In order to obtain the exemption, the purchaser must certify to the use primarily in
production agriculture of the equipment or machinery. See Section 130.305(a).
Production agriculture is defined under the Retailers’ Occupation Tax Act as “the raising of or
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.” See 35 ILCS 120/2-35. Further, production agriculture, with respect to crops, includes mapping
fields, applying farm chemicals, as well as activities necessary in tilling the soil, planting, irrigating, cultivating,
applying herbicide, insecticide, or fertilizer, as well as, harvesting and drying of crops. Activities such as the
clearing of land, mowing of fence rows or ditches, creation of ponds or drainage facilities, scouting crops and
tile mapping are not included, nor are the operations involved in the storing or transporting of crops and
produce, Section 130.305(f).
An aircraft used in production agriculture may qualify for the farm machinery and equipment exemption
if the aircraft is used primarily in a qualifying manner, as described above. However, if it were used, for
example, primarily for crop scouting and field maintenance activities, it would not qualify. Please see
Compliance Alert 2007-03 regarding the use of other equipment to perform these activities.
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:bkl