New York State tax exempt Form ST-125, the Farmer’s and Commercial Horse Boarding Operator’s Exemption Certificate, lets a qualifying farm or horse boarding business buy equipment, supplies, and certain services without paying state or local sales tax. You give the completed certificate to the vendor at the time of purchase, and the vendor does not collect the tax. There is no refund application, no waiting, and no filing with the state, as long as you and the purchase both meet the rules.
Who Qualifies to Use the Certificate
Two kinds of operations can issue an ST-125: farmers and commercial horse boarding operators. The definitions are not interchangeable, and each has its own test.
Farmers
The farming exemption comes from New York Tax Law Section 1115(a)(6). “Farming” is defined broadly and includes agriculture, floriculture, horticulture, aquaculture, silviculture, stock and dairy farming, poultry, fruit farming, fur-bearing animal operations, truck farming, tree farming, ranching, and running nurseries, greenhouses, vineyards, and orchards. What ties all of these together is commercial output. The operation has to produce tangible personal property for sale, whether that is crops, livestock, livestock products, timber, or firewood. A backyard garden or a horse you ride for pleasure does not qualify, no matter how much you spend on it.
Commercial Horse Boarding Operators
Horse boarding operations face three thresholds, and all three must be met at the same time:
- At least seven acres of land
- At least ten horses boarded, regardless of who owns them
- At least $10,000 in annual gross receipts from boarding fees, from crop and livestock production, or from a combination of the two
Fifteen horses on four acres does not qualify. Ten horses on ten acres pulling in $6,000 a year does not qualify. Missing any one leg of the test disqualifies the whole operation.
What You Can Buy Tax-Free
The exemption is not a blanket pass on everything a farm buys. It applies to specific categories, each with its own checkbox on the form, labeled A through F. Check the box that actually fits your purchase.
- Box A covers tangible personal property and building materials used in farm production or horse boarding, including equipment, tools, supplies, and materials that become part of farm structures. The item has to be used predominantly (more than 50%) in production.
- Box B covers installation, repair, maintenance, and servicing of property that itself qualifies. If the equipment is exempt, work performed on it is exempt too.
- Box C covers repair, maintenance, and servicing of farm buildings, structures, and other real property used predominantly in production or boarding.
- Box D covers motor vehicles, including cars, trucks, and ATVs, used predominantly in production or boarding. For vehicles, you can measure predominant use by either mileage or hours, whichever favors you. Qualifying use includes any use on farmed property and direct, uninterrupted trips between farmed properties.
- Box E covers gas (including propane in containers of 100 pounds or more), electricity, refrigeration, and steam used in production or boarding. Utilities do not have to clear the 50% threshold. Any use in production makes them exempt.
- Box F covers drugs and medicine for livestock and poultry used in farm production, whether you administer them yourself or a veterinarian does.
What “Predominantly” and “Production” Mean
Two words decide most disagreements about this exemption. Get them right and the paperwork almost writes itself.
“Predominantly” means more than half. For most property, that is 50% of overall use. For motor vehicles, you can calculate it by mileage or by hours, at your discretion. A tractor used 60% for fieldwork and 40% for maintaining your driveway qualifies. Reverse the split and it does not.
The “production phase” starts with soil preparation, or with the beginning of an animal’s life cycle, and ends when the product is ready for sale in its natural state. General office work and sales promotion sit before production. Retail packaging and hauling finished product to market sit after. Neither is exempt. Administrative work directly tied to production, like feed records or research linked to farm output, is treated as part of production.
How to Complete the Form
You can download Form ST-125 as a PDF from the New York State Department of Taxation and Finance website. Fill in the purchaser’s name and address and the vendor’s name and address. If you hold a New York State Certificate of Authority for sales tax purposes, enter that number in the designated field.
Then check the box or boxes (A through F) that describe how you will use the purchase, and write a specific description of what you are buying. “Farm supplies” is not specific enough. Write something an auditor could tie back to production, like “replacement hydraulic hoses for hay baler” or “electrical wiring for milking parlor renovation.”
Sign and date the certification at the bottom. That signature is the whole point of the document, and misusing it carries real penalties, covered below.
You can also mark the certificate as a blanket certificate, which covers all future qualifying purchases of the same type from the same vendor. If you buy diesel or vet supplies from the same supplier every month, a blanket certificate saves you from filling out a fresh form each time.
Giving the Certificate to the Vendor
You hand the completed ST-125 to the seller. You do not file it with the state.
Under New York Tax Law Section 1132(c), the vendor must receive the certificate within 90 days after delivery of the property or completion of the service. A certificate delivered inside that window relieves the vendor of liability for the uncollected tax. Miss the window and the sale is presumed taxable, which puts the vendor on the hook and, in practice, puts you on the hook to make the vendor whole.
If you get the certificate in on time but it has a minor problem, like a blank field or a vague description, you can still fix it later. A timely but deficient certificate satisfies the deadline as long as the deficiency is later corrected. It’s a useful backstop. Don’t rely on it.
If You Already Paid Sales Tax by Mistake
If you paid sales tax on a purchase that should have been exempt, start by asking the vendor for a credit or refund directly. If that doesn’t work, you can apply for a refund from the Department of Taxation and Finance. The deadline is the later of three years from the date the tax was due or two years from the date you paid it.
Submit your signed application along with receipts, invoices, a copy of the ST-125 you should have issued, and a written explanation of why the purchase qualifies. If someone signs the application for you, include a Power of Attorney (Form POA-1). Incomplete refund claims stall, so pull everything together before you file.
Recordkeeping for Both Sides
Both the buyer and the vendor need to keep the certificate on file. New York regulations require vendors to retain documentation supporting exempt transactions for at least three years after the date the transaction was required to be reported. Once the vendor has a properly completed certificate, the burden of proving the exemption was valid shifts to the purchaser who issued it.
The state does not accept a general claim that most of a vendor’s customers are farmers. Each untaxed sale needs a traceable path to a specific certificate. Keep your own copies for at least the same three-year period, because if the state questions your tax-free purchases during an examination, you will need to show that you issued the certificate and that the purchase actually qualified.
Penalties for Misusing the Certificate
Handing a vendor an ST-125 for a purchase that doesn’t qualify is an expensive mistake. The civil penalty is $50 per misused certificate plus 100% of the tax that should have been collected. On a $30,000 truck bought for personal use with a fraudulent certificate, that can mean the full sales tax doubled, plus $50 per document.
Issuing a false or fraudulent exemption certificate with intent to evade tax is also a criminal offense under New York Tax Law, carrying possible fines and jail time. Audit programs specifically target businesses with high volumes of exempt sales and missing or incomplete certificates.
The rule is simple. If the item will be used predominantly in farm production or horse boarding, issue the certificate. If it won’t, or if you are honestly not sure it will clear 50% production use, pay the tax and keep the receipt.