Is cattle-management computer software and hardware bought by a farmer exempt as farm machinery and equipment?

Plain-English summary

The Department addressed whether cattle-management computer software and the hardware to run it, bought by a farmer, are exempt as farm machinery and equipment. The short version: no — cattle-tracking software is not farm machinery and equipment, so the software, its hardware, the install/maintenance labor, hardware parts, and any warranty or maintenance agreements are all taxable.

The Department started from the exemption statute:

• The farm machinery and equipment exemption (K.S.A. 79-3606(t)). It exempts "all sales of farm machinery and equipment or aquaculture machinery and equipment, repair and replacement parts therefor and services performed in the repair and maintenance of such equipment." The definition includes machinery and equipment used in Christmas tree farming, but excludes any "passenger vehicle, truck, truck tractor, trailer, semitrailer or pole trailer, other than a farm trailer, as such terms are defined by K.S.A. 8-126."
• Cattle-management software does not qualify. "[B]oth the bunkreader and vet records software would not qualify as farm machinery and equipment, since said software tracks cattle feeding operations, and therefore would not come within the scope of the sales tax exemption in K.S.A. 79-3606(t)."
• Everything tied to it is taxable. "[T]he purchase of the software, the hardware to run the software, as well as the labor to install or maintain the hardware and software and any repair and replacement parts for said hardware would not be exempt from Kansas sales tax." And "K.S.A. 79-3606(t) would not exempt the sale of warranty or maintenance agreements for the hardware and software."

What this means for you

Farmers and ranchers buying farm software

Software that manages or records your operations — feeding, veterinary records, herd management — is not treated as exempt farm machinery and equipment. Expect to pay Kansas sales tax on it, on the computers that run it, on installation and maintenance labor, and on hardware parts.

Warranty and maintenance agreements

The exemption does not cover warranty or maintenance agreements for this hardware and software, so those charges are taxable too.

Where the exemption does apply

K.S.A. 79-3606(t) still exempts genuine farm machinery and equipment, its repair and replacement parts, and repair/maintenance services on that equipment. The line the Department drew is that information/record-keeping software (and its supporting computer hardware) is not "machinery and equipment" within the exemption.

Common questions

Q: Is farm-management software exempt as farm machinery in Kansas?
A: No. The Department's opinion is that cattle-tracking software (bunkreader and vet records) is not farm machinery and equipment, so it is not exempt under K.S.A. 79-3606(t).

Q: What about the computer hardware and the install labor?
A: Also taxable. The hardware to run the software, the labor to install or maintain the hardware and software, and hardware repair/replacement parts are not exempt.

Q: Are warranty or maintenance agreements exempt?
A: No. K.S.A. 79-3606(t) does not exempt warranty or maintenance agreements for the hardware and software.

Citations and references

• K.S.A. 79-3606(t) — the farm machinery and equipment exemption; covers farm/aquaculture machinery and equipment, repair and replacement parts, and repair/maintenance services, but not cattle-management software, its hardware, related labor and parts, or warranty/maintenance agreements.
• K.S.A. 8-126 — supplies the vehicle definitions used in K.S.A. 79-3606(t) to exclude passenger vehicles, trucks, trailers, and the like (other than a farm trailer) from the exemption.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: O-1998-03

Original ruling text

Opinion Letter

Body:

Office of Policy & Research

August 5, 1998

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Dear Ms. TTTTTTTTTTT:

We wish to acknowledge receipt of your letter dated April 21, 1998, regarding the application of Kansas Retailers’ Sales tax.

K.S.A. 79-3606(t) exempts from sales tax: “all sales of farm machinery and equipment or aquaculture machinery and equipment, repair and replacement parts therefor and services performed in the repair and maintenance of such equipment. For purposes of this subsection the term “farm machinery and equipment or aquaculture machinery and equipment” shall include machinery and equipment used in the operation of Christmas tree farming but shall not include any passenger vehicle, truck, truck tractor, trailer, semitrailer or pole trailer, other than a farm trailer, as such terms are defined by K.S.A. 8-126 and amendments thereto. . .”

Please be advised that it is the opinion of this department that both the bunkreader and vet records software would not qualify as farm machinery and equipment, since said software tracks cattle feeding operations, and therefore would not come within the scope of the sales tax exemption in K.S.A. 79-3606(t). Accordingly, the purchase of the software, the hardware to run the software, as well as the labor to install or maintain the hardware and software and any repair and replacement parts for said hardware would not be exempt from Kansas sales tax, pursuant to K.S.A. 79-3606(t).

In closing, K.S.A. 79-3606(t) would not exempt the sale of warranty or maintenance agreements for the hardware and software.

If I may be of further assistance, please contact me at your earliest convenience at (785) 296-7776.

Sincerely yours,

Thomas P. Browne, Jr.
Tax Specialist

TPB

Date Composed: 09/02/1998 Date Modified: 10/10/2001

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