Internal Revenue Service
Revenue Ruling

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 Rev. Rul. 56-53

1956-1 C.B. 456

IRS Headnote

A company is engaged in the operation of an alfalfa processing plant. Employees of the company perform services in dehydrating alfalfa grown on its farm, mixing the alfalfa with other ingredients, and grinding the mixture into a feed for sale to livestock feeders. Held , such services do not constitute `agricultural labor' within the meaning of section 3121(g)(4)(A) of the Federal Insurance Contributions Act or section 3306(k)(4) of the Federal Unemployment Tax Act.

Full Text

Rev. Rul. 56-53

The Internal Revenue Service has been requested to determine whether services performed by employees of a company in connection with the operation of an alfalfa processing plant constitute `agricultural labor' under section 3121(g)(4)(A) of the Federal Insurance Contributions Act (chapter 21, subtitle C, Internal Revenue Code of 1954) or section 3306(k)(4) of the Federal Unemployment Tax Act (chapter 23, subtitle C of the 1954 Code).

The company operates an alfalfa processing plant which is used solely for processing alfalfa grown on its farm. The alfalfa is artificially dried at the plant (which is located on the farm where the alfalfa is grown). Then it is mixed with other ingredients and ground into a feed for livestock. All of the feed is sold to livestock feeders.

Services performed by an employee in the processing of alfalfa hay into alfalfa meal and in the handling, packing, packaging, grading, storing, or delivering to storage or to market or to a carrier for transportation to market of alfalfa meal constitute `agricultural labor' under section 3121(g)(4)(A) of the Federal Insurance Contributions Act, provided (1) such services are performed by the employee in the employ of an operator of a farm, (2) such operator is in possession and engaged in the operation of the farm or farms on which more than one-half of the alfalfa handled in a pay period is produced, and (3) such services are performed with respect to the commodity in its unmanufactured state, that is, with respect to the alfalfa meal, nothing else (such as other grains, syrups, etc.) having been added. See section 408.208(d)(5) of Regulations 128, applicable to the provisions of the Internal Revenue Code of 1954 by virtue of T.D. 6091, C.B. 1954-2, 47. Also, in determining whether a person qualifies as an `operator of a farm' under section 3121(g)(4)(A), see Revenue Ruling 174, C.B. 1953-2, 299.

Services performed by an employee in the processing of alfalfa hay into alfalfa meal and in the handling, etc., of alfalfa meal constitute `agricultural labor' under section 3306(k)(4) of the Federal Unemployment Tax Act, provided (1) such services are performed by the employee in the employ of a farmer who produced the alfalfa hay (or in the employ of a farmers' cooperative organization or group whose farmer-members produced the alfalfa hay) and (2) such services are of the character ordinarily performed by the employees of a farmer (or of a farmers' cooperative organization or group) as a prerequisite to the marketing of the alfalfa meal in its unmanufactured state, that is, with nothing else added. See section 403.208(e) of Regulations 107, applicable to the provisions of the 1954 Code by virtue of T.D. 6091, supra .

In determining whether the processing services are classifiable as `agricultural labor' under section 3121(g)(4)(A) or section 3306(k)(4), it is immaterial whether the processing plant is located on a farm.

In the instant case, since the company mixes the dried alfalfa with other ingredients, grinds the dried alfalfa and other ingredients into a feed for livestock, and sells the product to livestock feeders, the processing services are not performed with respect to the commodity in its unmanufactured state. Therefore, such services are not performed under the circumstances and conditions necessary to meet the requirements of section 3121(g)(4)(A) of the Federal Insurance Contributions Act or section 3306(k)(4) of the Federal Unemployment Tax Act. Accordingly, it is held (1) that the processing services do not constitute `agricultural labor' for purposes of the taxes imposed by the Federal Insurance Contributions Act and (2) that such services do not constitute `agricultural labor' and are not excepted from `employment' under the provisions of the Federal Unemployment Tax Act.