Growing Plants For Sale Constituted Farming

Tuesday, July 22nd, 2014

A Christmas tree farm.
New York

The New York Department of Taxation and Finance ("Department") recently released an advisory opinion stating that a taxpayer's cultivation of plants, shrubs, and trees constituted farming.

The taxpayer grew and sold plants, shrubs, and trees. The taxpayer did not grow these from seeds; instead, it bought plants and grew them at its nursery for anywhere from two months to three years. The taxpayer irrigated, spaced, weeded, pruned, fertilized, mulched, re-burlapped, and repotted plants as they grew. When the plants and trees reached certain sizes, the taxpayer sold them.

New York exempts sales of tangible personal property used predominantly in farming. "Farming" includes agriculture, floriculture, horticulture, and silviculture; truck and tree farming; operating nurseries, greenhouses, vineyard trellises or other similar structures used primarily for raising agricultural, horticultural, floricultural, or silvicultural commodities; and raising, growing, and harvesting crops. To be exempt, property must be used in production. Production begins with the preparation of soil and ends when the product is in the form in which the farmer will offer it for sale.

The Department determined that the taxpayer's activities constituted farming and farming production. If the taxpayer sold the plants in the same form in which it received them, the taxpayer's activities would not be farming production. Production would have ended when the plants were in the form in which the taxpayer sold them. Because the taxpayer did not receive plants in the form in which it would sell them and instead tended the plants until they were in saleable form, the taxpayer's activities constituted farming production. The taxpayer could therefore use the farming exemption.

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