Ruling 96-5, Sales and Use Taxes / Agricultural Production
An individual conducting a business of breeding and raising horses also boards and trains horses belonging to others. Such boarding includes the daily feeding and care of the horses, turning the horses out to pasture and cleaning and maintaining their stalls.
Whether boarding and training horses belonging to others is considered to be agricultural production under Conn. Gen. Stat. §12-412(63), so that a person engaged in boarding horses may apply for a Farmer Tax Exemption Permit entitling such person to make exempt purchases of tangible personal property exclusively for use in such agricultural production.
Purchases of tangible personal property for use exclusively in agricultural production by a farmer engaged in such production as a trade or business, and who has been issued a Farmer Tax Exemption Permit, are exempt under Conn. Gen. Stat. §12-412(63), provided that in the preceding calendar year the farmer's gross income from such production was at least $2,500, as reported for federal income tax purposes on Schedule C or Schedule F attached to Form 1040, 1041 or 1065, or would be reportable on such schedule but for the fact that the business is conducted by a corporation. The statute defines "agricultural production" as engaging, as a trade or business, in (A) the raising and harvesting of any agricultural or horticultural commodity, (B) dairy farming, (C) forestry, (D) the raising, feeding, caring for, shearing, training or management of livestock, including horses, bees, poultry, fur-bearing animals or wildlife, or (E) the raising and harvesting of fish, oysters, clams, mussels or other molluscan shellfish. A "farmer" is defined in the statute as any person engaged in agricultural production as a trade or business. Since the definitions of "agricultural production" and "farmer" do not require that the livestock being raised, fed, cared for, sheared, trained or managed belong to the farmer seeking exemption under Conn. Gen. Stat. 12-412(63), it follows that persons who board or train livestock belonging to others may also be considered to be farmers engaged in agricultural production.
As originally enacted in 1989, Conn. Gen. Stat. §12-412(63) only allowed gross income from sales of agricultural products that was reported on Schedule F (Profit or Loss From Farming), which is used to report income from sales of animals or produce, to be counted towards the statutory $2,500 threshold before the farmer could be considered eligible for the agricultural production exemption. Income from boarding or training horses owned by others could not be used to qualify for a Farmer Tax Exemption Permit under Conn. Gen. Stat. §12-412(63) since such income is from sales of services and is not from sales of agricultural products. The statute was amended by 1993 Conn. Pub. Acts 122, effective October 1, 1993, to repeal the requirement that the gross income counted towards the $2,500 threshold be derived from the sale of agricultural products, and also to allow gross income reported on Schedule C (Profit or Loss From Business, which is used to report income from all sources, including sales of services), in addition to gross income reported on Schedule F, to be counted towards the $2,500 threshold. Therefore, with this statutory change, it ceased to be a prerequisite to be eligible for a Farmer Tax Exemption Permit that a farmer be engaged in selling animals or produce that are owned and raised by the farmer.
Under Conn. Gen. Stat. §12-412(63), a person engaged in boarding or training horses belonging to others who has qualified for and been issued a Farmer Tax Exemption Permit may make tax exempt purchases of tangible personal property, such as feed, hay and bedding, for exclusive use in agricultural production, including tangible personal property used in providing the service of boarding or training horses.
A person deriving income as a trade or business from boarding or training horses belonging to others, even if such person makes no sales of horses or other agricultural products, is a "farmer" engaged in "agricultural production," as such terms are defined in Conn. Gen. Stat. §12-412(63), and may qualify for a Farmer Tax Exemption Permit as long as the person's gross income during the preceding calendar year from boarding or training horses, as reported on Schedule C or Schedule F attached to federal Form 1040, 1041 or 1065, was at least $2,500.
LEGAL DIVISION
Issued June 14, 1996