Are semi-trailers sold to farmers and ranchers exempt from Kansas sales tax as farm machinery and equipment?

Plain-English summary

A dealer that sells semi-trailers to farmers and ranchers asked whether those trailers are exempt from Kansas sales tax as farm machinery and equipment. The Department ruled they can be — if they qualify as farm trailers and are certified for farm-only use.

The general definition, and its exclusion. Kansas exempts "farm machinery and equipment," which the Department has historically defined as "machinery and equipment purchased by a farmer or rancher which is ordinary and necessary for the growing or raising [of] agricultural products." Crucially, "[t]he statutory definition does not include any passenger vehicle, truck, truck tractor, trailer, semitrailer, or pole trailer, other than a farm trailer." So trailers are excluded — unless they are farm trailers.

Four conditions to qualify. To be exempt, the trailer must:

1. be purchased for use only in farming and ranching (K.S.A. 79-3606(t));
2. be designed to allow for farm or ranch use (K.S.A. 8-126(z));
3. be covered by a signed affidavit — the farm machinery and equipment exemption certificate — certifying farm-or-ranch-only use; and
4. be for the farmer's or rancher's own use in their operation.

Incompatible use destroys the exemption. "A trailer used to haul commodities, livestock or other goods for others or utilizing the trailer for a commercial use other than farming and ranching are uses that are incompatible with the exempt use." The Department stressed that "any incompatible use would disqualify the trailer for exemption," subjecting the purchaser to "retailers' sales tax, penalty and interest on the original purchase amount."

The holding. "[S]emi-trailers such as grain, flatbed, dump, tank, and van which are designed to allow for farm and ranch work and for which the purchaser certifies that the semi-trailer will only be used in farming and ranching are exempt from Kansas retailers' sales and compensating taxes. Converter gears that are utilized to facilitate the transport of farm trailers would also be exempt as farm machinery."

What this means for you

Trailer and equipment dealers

You can sell qualifying farm semi-trailers (grain, flatbed, dump, tank, van) exempt — but only when the trailer is designed for farm/ranch work and the buyer completes and signs the farm machinery and equipment exemption certificate certifying farm-or-ranch-only use. Keep the signed certificate; without it, the default is tax. Converter gears used to move farm trailers are exempt too.

Farmers and ranchers buying trailers

The exemption depends on your actual use. The trailer must be for your own farming or ranching operation. If you use it to haul for others or for any non-farm commercial purpose, you lose the exemption and owe sales or compensating tax, plus penalty and interest, on the original purchase amount.

"Farm trailer" is the narrow exception to a broad exclusion

Kansas's farm-machinery exemption expressly excludes trucks, tractors, and most trailers. Farm trailers are the carve-back. Confirm the trailer is genuinely designed for and dedicated to farm/ranch use before treating a sale as exempt.

Common questions

Q: Is a semi-trailer sold to a farmer exempt from Kansas sales tax?
A: It can be. A trailer designed for farm/ranch use and certified by the buyer for farm-or-ranch-only use qualifies as exempt farm machinery under K.S.A. 79-3606(t) and 8-126(z). Otherwise trailers are excluded from the exemption.

Q: What happens if the farmer uses the trailer to haul for hire?
A: That is an incompatible use that disqualifies the exemption. The purchaser then owes sales or compensating tax, plus penalty and interest, on the original purchase amount.

Q: Do converter gears qualify?
A: Yes. The Department ruled converter gears used to facilitate the transport of farm trailers are also exempt as farm machinery.

Citations and references

• K.S.A. 79-3606(t) — the Kansas farm machinery and equipment sales-tax exemption; requires the farm trailer to be purchased for use only in farming and ranching, documented by a signed exemption certificate.
• K.S.A. 8-126(z) — the definition the Department used to require that the trailer be designed to allow for farm or ranch use in order to qualify as a farm trailer.

Source

• Landing page: Kansas Department of Revenue Policy Information Library
• Original document: P-2000-022

Original ruling text

Private Letter Ruling

Body:

Office of Policy & Research

May 10, 2000

X
XXXXXXXXXXXXXXX
XXXXXXXXXXXX

Dear XXXXXXXXXXXXXX:

The purpose of this letter is to respond to your letter dated January 25, 2000. This is a private letter ruling pursuant to Kansas Administrative Regulation 92-19-59.

In your letter you request that the Department rule as to the taxability of semi-trailers sold by your business to farmers and ranchers.

Kansas statutes exempt farm machinery and equipment. The Department of Revenue has historically defined the phrase “farm machinery and equipment” to mean machinery and equipment purchased by a farmer or rancher which is ordinary and necessary for the growing or raising or agricultural products. The statutory definition does not include any passenger vehicle, truck, truck tractor, trailer, semitrailer, or pole trailer, other than a farm trailer.

In order to be exempt, the farm trailer must be purchased for use only in farming and ranching, per K.S.A. 79-3606(t). The trailer must also be designed to allow for farm or ranch use, per K.S.A. 8-126(z). The purchaser must sign an affidavit (farm machinery and equipment exemption certificate) certifying that the trailer will be used only in farming or ranching. The trailer must be for the farmer’s or rancher’s own use in their farming or ranching operation. A trailer used to haul commodities, livestock or other goods for others or utilizing the trailer for a commercial use other than farming and ranching are uses that are incompatible with the exempt use. Purchasers using the trailers for incompatible uses are required to pay sales or compensating tax and not allowed to claim an exemption based on the exemption for farm and ranch machinery or equipment

It should be stressed that any incompatible use would disqualify the trailer for exemption. Disqualification of the exemption would subject the purchaser to the retailers’ sales tax, penalty and interest on the original purchase amount.

Therefore, semi-trailers such as grain, flatbed, dump, tank, and van which are designed to allow for farm and ranch work and for which the purchaser certifies that the semi-trailer will only be used in farming and ranching are exempt from Kansas retailers’ sales and compensating taxes. Converter gears that are utilized to facilitate the transport of farm trailers would also be exempt as farm machinery.

I have enclosed a copy of the farm machinery and equipment exemption certificate to be completed by you and signed by the purchaser. You may duplicate and use this certificate as needed.

This private letter ruling is based solely on the facts provided in your request. If it is determined that undisclosed facts were material or necessary to an accurate determination by the department, this ruling is null and void. This private letter ruling
will be revoked in the future by operation of law without further department action if there is a change in the statutes, administrative regulations, or case law, or a published revenue ruling, that materially affects this private letter ruling.

Sincerely,

Mark D. Ciardullo
Tax Specialist

MDC

Enclosure: Farm machinery and equipment exemption certificate

Date Composed: 05/10/2000 Date Modified: 10/11/2001

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