The South Dakota Department of Revenue (SDDOR) has updated its guidance on the sales tax implications of selling farm machinery. The guidance notes that all sales of farm machinery, attachment units and irrigation equipment that are exclusively used for agricultural purposes in South Dakota are subject to a four percent excise tax. For purposes of the tax, "agricultural purposes" means the "producing, raising, growing, or harvesting of food or fiber upon agricultural land," and "agricultural land" is defined under S.D.C.L. Sec. 10-6-31.3. The services of custom harvesters, chemical applicators, fertilizer spreaders and cultivators are considered to be agricultural purposes. Repair parts, repair services, maintenance supplies and services to farm machinery and attachment units that are used exclusively for ag purposes are exempt from the excise tax as well as sales and use tax. That is the case for repair parts if the repair parts replace a part that the manufacturer assigned a specific or generic part number. The SDDOR states that the buyers have the responsibility to pay the excise tax directly to the SDDOR if the retail seller does not collect the tax and report it as a use tax on the state sale tax return. South Dakota Tax Facts No. Oct. 1, 2015 (Farm Machinery Attachment Units and Irrigation Equipment).
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