Is a Missouri farmer's purchase of a high tunnel (a temporary, movable greenhouse-like structure) from a farm and feed store subject to Missouri sales tax?

Subject

Taxability of a High Tunnel for Agricultural Use

Plain-English summary

The Missouri Department of Revenue ruled that a purchase of a high tunnel from a Missouri farm and feed store is not subject to sales tax, as long as the high tunnel is used for any agricultural purpose.

A high tunnel is similar to a greenhouse, but is usually more of a temporary and/or movable piece of equipment -- it has no foundation and uses clear, flexible plastic sheeting instead of a rigid covering. Farmers use high tunnels to extend the growing season into fall and winter, to over-winter crops, or to plant earlier than the outside weather would otherwise allow. Crops are typically planted directly in the soil within the high tunnel's footprint (in mounded soil, enclosed "beds," or as row crops), and the structure can also help keep insects off crops and control environmental conditions. High tunnels are often used to trellis crops for higher yield, and importantly, they can be removed from the soil and relocated without leaving behind a foundation or footing.

Section 144.020, RSMo, imposes sales tax on retail sales of tangible personal property in Missouri. But Section 144.030.2(22), RSMo, exempts from sales tax "all sales of farm machinery and equipment," which the statute defines to include new or used farm tractors and "such other new or used farm machinery and equipment... used for any agricultural use." Section 144.045.1, RSMo, separately directs the Department to treat qualifying farm machinery/equipment as nontaxable "whether or not such machinery or equipment is attached to a vehicle or real property." And the Department's own regulation, 12 CSR 10-110.900(2)(A), defines "equipment" as devices that have "a degree of permanence to the business, contribute to multiple processing cycles over time, and generally constitute fixed assets."

Applying these authorities, the Department found that the Applicant was purchasing the high tunnel to be used directly for producing crops, that high tunnels have a degree of permanence, and that they can contribute to multiple crop cycles. On those facts, if the Applicant purchases the high tunnel for any agricultural purpose, the high tunnel qualifies as exempt "farm machinery and equipment" under Section 144.030.2(22), RSMo -- so the purchase is not subject to sales tax.

What this means for you

Farmers and agricultural buyers

If you are buying a high tunnel (or a similar temporary, movable, non-foundation structure used to grow crops) from a Missouri farm and feed store, this ruling indicates the purchase should not be subject to Missouri sales tax, provided you are using the high tunnel for an agricultural purpose such as producing crops. The exemption turns on the "farm machinery and equipment" category in Section 144.030.2(22), RSMo, not on any special high-tunnel-specific statute, so keep records showing the agricultural use of the structure in case that use is ever questioned.

Farm and feed stores and other sellers

If you sell high tunnels or comparable temporary growing structures to customers who will use them for agricultural purposes, this ruling supports treating those sales as exempt "farm machinery and equipment" sales, similar to how you would treat sales of farm tractors or other qualifying farm equipment. The reasoning here rests heavily on the facts about how high tunnels are typically used (planting directly in soil, extending growing seasons, being removable without a foundation) -- if a structure in your inventory works differently (for example, a permanent greenhouse with a foundation), that structure's tax treatment may need separate analysis.

Accountants and tax professionals

When advising a client on farm structure purchases, confirm the item is actually used "for any agricultural use" (the statutory standard) and check whether it functions like "equipment" under 12 CSR 10-110.900(2)(A) -- i.e., whether it has a degree of permanence to the business and contributes to multiple processing/crop cycles, even without a permanent foundation. Also note that Section 144.045.1, RSMo, means attachment to real property or a vehicle does not disqualify otherwise-qualifying farm machinery and equipment from the exemption.

Common questions

Q: Is a high tunnel taxable when purchased from a Missouri farm and feed store?
A: No, not if it is used for any agricultural purpose. The Department ruled the purchase is not subject to sales tax under those circumstances.

Q: What makes a high tunnel exempt "farm machinery and equipment" rather than a taxable purchase?
A: The Department applied Section 144.030.2(22), RSMo, which exempts farm machinery and equipment used for any agricultural use, and 12 CSR 10-110.900(2)(A)'s definition of "equipment" as devices with a degree of permanence that contribute to multiple processing cycles. The Department found the high tunnel is purchased to be used directly for producing crops, has a degree of permanence, and can contribute to multiple crop cycles.

Q: Does it matter that a high tunnel has no foundation and can be moved?
A: No. Section 144.045.1, RSMo, directs the Department to treat qualifying farm machinery and equipment as nontaxable "whether or not such machinery or equipment is attached to a vehicle or real property," so the lack of a permanent foundation does not defeat the exemption.

Q: How is a high tunnel different from a traditional greenhouse, according to the ruling?
A: The ruling describes a high tunnel as similar to a greenhouse but "usually considered more of a temporary and/or movable piece of equipment without a foundation or a rigid plastic covering, using clear and flexible plastic sheeting instead."

Q: Can another Missouri farmer rely on this exact ruling for their own high tunnel purchase?
A: Not automatically. This letter ruling is binding on the Department only with respect to the requesting Applicant, only for three years from its date, and only so long as the facts and underlying law remain unchanged. A different buyer should confirm their own facts match -- particularly that the high tunnel will be used for an agricultural purpose -- and consult a tax professional before relying on this result.

Source

• Landing page: Missouri DOR Rulings Search
• Ruling: LR 8223

Original ruling text

Dear Applicant:

This is a letter ruling issued by the Director of Revenue under Section 536.021.10, RSMo, and Missouri Code of State Regulations 12 CSR 10-1.020, in response to your letter dated November 3, 2022.

The facts as presented in your letter ruling request are summarized as follows:

Applicant is purchasing a structure called a high tunnel from a Missouri farm and feed store. A high tunnel is similar to a greenhouse, but is usually considered more of a temporary and/or movable piece of equipment without a foundation or a rigid plastic covering, using clear and flexible plastic sheeting instead. High tunnels are used to extend the growing season of crops into the fall and/or winter, to over-winter crops, or to plant crops earlier than they would normally be allowed if planted outside due to weather. Crops are typically planted in the soil within the high tunnel footprint using mounded soil, enclosed "beds," or as row crops. High tunnels can also prevent insects from damaging crops, and generally help to control environmental conditions to increase the likelihood of successful production. High tunnels are often used to trellis the crops grown under them to increase yield by attaching strings to the cross bracing that extends across the high tunnel over 5 or 6 feet. High tunnels can be removed from the soil and relocated to a new location, without leaving a foundation or footing behind.

ISSUE :

Is Applicant's purchase of a high tunnel from a Missouri farm and feed store subject to sales tax?

RESPONSE :

No. Applicant's purchase of a high tunnel from a Missouri farm and feed store is not subject to sales tax if the high tunnel is used for any agricultural purpose.

Section 144.020, RSMo, imposes a sales tax on the privilege of making retail sales of tangible personal property or providing certain taxable services in this state.

Section 144.030.2(22), RSMo, in pertinent part, exempts from sales tax "all sales of farm machinery and equipment, other than airplanes, motor vehicles and trailers[.]" The statute defines "farm machinery and equipment" as:

...new or used farm tractors and such other new or used farm machinery and equipment, including utility vehicles used for any agricultural use, and repair or replacement parts thereon and any accessories for and upgrades to such farm machinery and equipment and rotary mowers used for any agricultural purposes.  For the purposes of this subdivision, "utility vehicle" shall mean any motorized vehicle manufactured and used exclusively for off-highway use which is more than fifty inches but no more than eighty inches in width, measured from outside of tire rim to outside of tire rim, with an unladen dry weight of three thousand five hundred pounds or less, traveling on four or six wheels;

(b)  Supplies and lubricants used exclusively, solely, and directly for producing crops, raising and feeding livestock, fish, poultry, pheasants, chukar, quail, or for producing milk for ultimate sale at retail, including field drain tile; and

(c)  One-half of each purchaser's purchase of diesel fuel therefor which is:

a. Used exclusively for agricultural purposes;

b. Used on land owned or leased for the purpose of producing farm products; and

c. Used directly in producing farm products to be sold ultimately in processed form or otherwise at retail or in producing farm products to be fed to livestock or poultry to be sold ultimately in processed form at retail;

Section 144.045.1, RSMo, in the pertinent part, provides that:

"The department of revenue shall, for purposes of administrative interpretation, consider as nontaxable any machinery or equipment meeting the definition of "farm machinery" under subdivision (22) of subsection 2 of section 144.030, whether or not such machinery or equipment is attached to a vehicle or real property."

The Missouri Code of State Regulations 12 CSR 10-110.900(2)(A)  defines "equipment" as:

"[d]evices that have a degree of permanence to the business, contribute to multiple processing cycles over time, and generally constitute fixed assets, other than land and buildings, that are capitalized and depreciated for purposes of business and accounting practices. "

Applicant is purchasing the high tunnel to be used directly for producing crops. The high tunnels have a degree of permanence and can contribute to multiple crop cycles. If Applicant purchases the high tunnel to be used for any agricultural purpose, the high tunnel constitutes "farm machinery and equipment" for purposes of Section 144.030.2(22), RSMo.

This letter ruling is binding upon the Department of Revenue with respect to the Applicant for three (3) years from the date of this letter and is subject only to statutory changes by the General Assembly and to changes in the interpretation of law by the courts or administrative tribunals.  If a change occurs, the taxpayer who relies upon an outdated interpretation may be subject to additional taxes, interest and penalties, which may be imposed prospectively from the date of the change.  For this reason, the interpretation set forth above should be reviewed on a regular basis.  Please note that any change in or deviation from the facts as presented will render this ruling inapplicable.

Should additional information be needed, please contact Legal Counsel J. Ross Shelton, General Counsel's Office, Post Office Box 475, Jefferson City, Missouri 65105-0475, phone (573) 751-0961.

Sincerely,

Wayne Wallingford

WW:MAS:CRF:JRS:km