Is raising chickens for research/vaccine eggs (not food) a farming activity eligible for the sales tax exemption?

Plain-English summary

A New York farm raises chickens to produce fertilized, specific-pathogen-free eggs sold to vaccine manufacturers and research/educational institutions nationwide. The eggs are strictly for research and vaccine production and are never sold for human consumption (only occasional donations of excess and de minimis crop sales). It asked whether it qualifies for the farming exemption on its purchases.

The Office of Counsel concluded it does qualify:

• Tax Law section 1115(a)(6)(A) exempts property used or consumed predominantly in the production for sale of tangible personal property by farming.
• Farming is defined to include poultry and the production of eggs (Tax Law section 1101(b)(19); Agriculture and Markets Law section 301(2)), and the regulation confirms that raising poultry or animals that produce a product for sale is farming (20 NYCRR 528.7(b)(1), Example 1) — and is not limited to food for human consumption.
• Because the farm raises and breeds chickens that produce eggs for sale, it is engaged in farming, so its qualifying purchases for those farming purposes are exempt.

What this means for you

Non-food and specialty agriculture

The farm-production exemption is about producing tangible personal property for sale by farming — it is not limited to human food. Raising poultry or animals whose products you sell (here, research eggs) is farming, even when the end use is industrial, research, or vaccine production.

What matters is production for sale

The driver is that the operation raises animals/produces a product for sale. The buyers identity (labs, manufacturers) and the products non-food use dont disqualify the exemption. Use Form ST-125 to claim it on qualifying purchases.

Common questions

Q: Our eggs are never eaten — theyre for vaccines and research. Is that still farming?
A: Yes. Farming is not limited to producing human food; raising poultry that produce eggs for sale is farming.

Q: We rarely sell traditional crops — does that hurt us?
A: No. The qualifying activity is raising chickens that produce eggs for sale, which is itself farming.

Q: What purchases are exempt?
A: Tangible personal property used or consumed predominantly in the farm production for sale; claim the exemption with the appropriate farmers exemption certificate.

Q: Can I rely on this opinion?
A: It binds the Department only as to the petitioner. Use it as guidance and confirm your own facts.

Citations and references

• Tax Law section 1115(a)(6)(A) (exemption for property used predominantly in farm production for sale)
• Tax Law section 1101(b)(19) (definition of farming, including poultry)
• Agriculture and Markets Law section 301(2) (livestock and livestock products include poultry and eggs)
• 20 NYCRR 528.7(b)(1) (raising poultry that produce a product for sale is farming)

Source

• Landing page: https://www.tax.ny.gov/pubs_and_bulls/advisory_opinions/sales_ao_2016.htm
• Opinion: https://www.tax.ny.gov/pdf/advisory_opinions/sales/a16_27s.pdf

Original ruling text

New York State Department of Taxation and Finance

TSB-A-16(27)S
Sales Tax
August 26, 2016

Office of Counsel
STATE OF NEW YORK
COMMISSIONER OF TAXATION AND FINANCE
ADVISORY OPINION

PETITION NO. S151005A

The Department of Taxation and Finance received a Petition for Advisory Opinion from
REDACTEDREDACTEDREDACTEDREDACTED (Petitioner). Petitioner asks whether it is
engaged in a nontaxable farming activity and therefore, is eligible for the sales and use (sales)
tax exemption for its farming-related purchases.
We conclude that Petitioner is engaged in a qualifying farming activity for purposes of
the sales tax exemption for farming-related purchases.
Facts
Petitioner has a single location in upstate New York. Petitioner raises chickens to
produce fertilized, specific-pathogen free eggs for sale to various vaccine manufacturers and
educational and research institutions across the country. The eggs are strictly for research and
development and vaccine manufacturing purposes and are never sold for human consumption.
However, Petitioner has and may donate excess production to a food pantry on occasion.
Petitioner also has made occasional de minimis sales of traditional crops (soybeans, corn, and
hay). However, it is highly unlikely that Petitioner will make any crop sales in the future.
Because of the specific and exact requirements of its customers, the eggs are produced
and processed pursuant to strict environmental and handling protocols. The protocols include,
but are not limited to the following: housing the chickens in filtered-air positive-pressure housing
units; keeping the chickens on a strict dietary schedule; immediately transferring eggs to
environmentally-controlled divisions; robotically grading, weighing and sanitizing the eggs; and
performing quality checks to make sure that the eggs are effectively fertilized.
Petitioner contracts with various third-party carriers in order to deliver the fertilized eggs
under specific environmental conditions. It does not own or operate any vehicles used to deliver
its eggs to customers. Further, it does not employ salespersons, employees, or any other
independent contractor or agents outside the State of New York.

Analysis
Tax is imposed on the sale, except for resale, of tangible personal property. See, Tax
Law §§ 1105(a), 1110(a). The Tax Law exempts from sales tax tangible personal property used

-2-

TSB-A-16(27)S
Sales Tax
August 26, 2016

or consumed predominantly in the production for sale of tangible personal property by farming.
Tax Law § 1115(a)(6)(A). Farming as used herein “includes agriculture, floriculture,
horticulture, aquaculture and silviculture; stock, dairy, poultry, fruit, fur bearing animal, . . . and
raising, growing and harvesting crops, livestock and livestock products, as defined by
[Agriculture and Markets Law § 301(2)]; … .” See, Tax Law § 1101(b)(19); see also 20
NYCRR § 528.7(b)(1). Agriculture and Markets Law § 301(2) defines livestock and livestock
products to include, but not be limited to “cattle, sheep, hogs, goats, horses, poultry, … , fur
bearing animals, wool bearing animals, such as alpacas and llamas, milk, eggs and furs.”
Further, 20 NYCRR § 528.7(b)(1), Example 1 provides that “[b]reeding, raising and feeding
livestock, poultry, or other animals which produce a product for sale or are themselves a food
product is farming.” Therefore, the definition of farming is not limited to the production of food
for human consumption.
Petitioner’s New York farm, as described, is engaged in the activity of farming for
purposes of Tax Law § 1115(a)(6)(A)’s exemption from sales tax for qualifying purchases.
Raising and harvesting of poultry and poultry products falls within the ambit of farming under
Tax Law§ 1115(a)(6)(A) and 20 NYCRR § 528.7. Petitioner’s farm raises and breeds chickens
that produce eggs that are sold to various vaccine manufacturers and educational and research
institutions. Accordingly, Petitioner’s qualifying purchases for these farming purposes are
exempt from sales tax.

DATED: August 26, 2016
/S/
DEBORAH R. LIEBMAN
Deputy Counsel

NOTE:

An Advisory Opinion is issued at the request of a person or entity. It is limited to the
facts set forth therein and is binding on the Department only with respect to the
person or entity to whom it is issued and only if the person or entity fully and
accurately describes all relevant facts. An Advisory Opinion is based on the law,
regulations, and Department policies in effect as of the date the Opinion is issued or
for the specific time period at issue in the Opinion. The information provided in this
document does not cover every situation and is not intended to replace the law or
change its meaning.