Thursday, March 04, 2010

Agricultural Exemptions

It shouldn't come as any surprise that, given the role politics plays in this, farmers get a lot of sales tax exemptions. In fact, aside from the District of Columbia, I know of no state that doesn't have pretty substantial exemptions for agriculture. DC doesn't have any of these exemptions for one simple reason...there are no farms in our nation's capital.

Here are the typical agricultural exemptions:

Harvesters, tractors, balers, cultivators, etc. are all usually exempt from sales and use tax, or they're taxed at a lower rate.

Other equipment is often exempt, such as machinery affixed to real property (eg. irrigation or milking equipment).

And generally, additions to buildings and land, like fencing, are not exempt.

Usually no exemptions exist for cars and trucks. Generally, the rule is that if it's required to be registered and plated, then there's no agricultural exemption.

Consumables such as seed, feed, fertilizers, pesticides and chemicals are usually exempt.

Now the problem begins for the people who sell to agriculture. I've known a few farmers in my citified life, and they're just like on TV. They're good, hardened, weather-beaten, independent folks. They won't take any guff from the guvmint and have no use for any paperwork. They usually are the hardest customers to get exemption certificates from. The farmer will insist that just being a farmer should be enough. It's not. Almost every state requires the seller to obtain those exemption certificates.

And they often are under the impression that everything they buy, even a mower for their front lawn is exempt. But most states have rules like this: the purchased goods must be used directly and predominantly in agriculture. That lawn mower ain't gonna do it.

Then there's the definition of agriculture. Generally, if a farmer raises produce that eventually will be eaten by humans, they're OK. Much more variable is the states' treatment of folks who raise livestock that won't be eaten (horses - I hope) and ornamental plants (nurseries and greenhouses).

There are often exemptions for horses raised for racing, and work animals.

Sales of their produce by farmers are often exempt. Even in states that have a sales tax on food, you probably won't have to pay tax at a farm stand if the farmer is selling his own produce.

Well, it's gettin' to be spring (wiping my brow with my bandanna). Time fer plantin'.

The Sales Tax Guy

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