Senate Bill 515, Drainage Water Management System Sales Tax Exemption

Sales tax on tile ditching has been a hot topic of conversations with several clients over the past month. Indiana has enacted Senate Bill 515 as of July 1, 2017, which includes a sales tax exemption on certain field tile and components.  Farm Bureau has posted numerous updates and articles about this new exemption for field tile, but it might not be available to many farmers.

Senate Bill 515 included a sales tax exemption for components of a “drainage water management system”. The bill specifically states the features of the system must facilitate controlled water drainage.  The NRCS website has information about drainage water management systems and a video about the system (found here) and it shows there must be a dam to control the level of water.  Our office has reviewed the Indiana Code, the Indiana Department of Revenue departmental notices and Commissioner Directives and there has been no mention of all field tile and components to be exempt from sales tax.  A new code section was added to the Indiana code and no prior section or subsection was amended or repealed upon passage of Senate Bill 515 related to the field tile and components.

We are aware Farm Bureau has pushed for the sales tax exemption, but we don’t believe the exemption is for all field tile purchases. If you are purchasing field tile and the tile company allows the purchase to be tax exempt, it would be best to continue to pay sales tax on the purchase.  We will continue to monitor all news releases and updates to the Indiana Code and send out any new information when it becomes available.