I was at the Southern States Feed store the other day, buying Hog feed, and the lady at the counter asked "Are you farm tax exempt?"

That has never happened before. I've been buying feed there for several years, and I didn't know what she meant, so I answered "Uh, I am raising these pigs for profit.

"Oh," she answered helpfully.

I checked my receipt and noticed that it was different from the standard one that I usually get, and she didn't charge me tax.

What is "Farm tax exempt", and do I qualify? I have four pigs, about thirty chickens and as many ducks. Mostly I just raise Kids. I try to profit from our farming activities, with mixed results. I am not incorporated or anything else, but I fill out a form that the USDA every year sends me that 'certifies' my intent to farm the land that year. I file a schedule F on my taxes. Does that make me a real farm, and if so, what else can I buy tax free?

The lady at SStates took my word for it, but is there any "proof" I need to show that I'm "farm tax exempt"? Like a farmer's ID card? Hehe.

-- Chuck (woah@mission4me.com), January 31, 2002

Answers

Chuck, We got our card through the county assessor's office at our court house. You should qualify with the livestock you have. They will have you fill out a form for an agricultural exemption permit. Here, they had to send it off to the Oklahoma Tax Commission for approval. Then they send the card to you in the mail. You will not have to pay sales tax on feed and other animal related items. Here in OK, we use the permit to get tags for our vehicles (only the ones used on the farm qualify) This means vehicles used to haul feed too. We didn't have to have any proof when we applied (many years ago), but the people in the court house know us. (Small town) You really should check into it. It saves us a bundle on tags. Good luck!

-- cowgirlone in OK (cowgirlone47@hotmail.com), January 31, 2002.

I meant to say that we get our farm vehicle tags at a lower rate, we still pay, but it's much lower than the regular fee! Best wishes!

-- cowgirlone in OK (cowgirlone47@hotmail.com), January 31, 2002.

I think tax exempt would have been the phrase they use here. Basicly if your a business and use materials, not for resale then you shouldnt have to pay a sales tax. You do have to have a tax ID and track your expenses on your tax forms.

-- Gary in Ohio (gws@columbus.rr.com), January 31, 2002.

You can also get no-road-tax diesel if you have a vendor of it...that or save your receipts for farm-use gas/diesel and you can be refunded the road taxes.

-- Susan (smtroxel@socket.net), January 31, 2002.

This varies from state to state, so no one answer here on the details of getting rebates, no tax, or lower taxes.

However, when you buy inputs for your farm, and sell commodities from it, you are wholesaling goods, and you should _not_ have to pay retail taxes on items used in your business. If you file a schedule F, you should qualify for whatever your state offers for reduced taxes for farm inputs.

--->Paul

-- paul (ramblerplm@hotmail.com), January 31, 2002.

Susan: Don't get caught using red-dye diesel in your go to town vehicles. The fines start at $2000 in MT, says my brother.

-- matt johnson (wyo_cowboy_us@yahoo.com), January 31, 2002.

Susan,

Matt is right and the residue from it will stay in your vehicle and be detected forever. I don't know what the fine is here in WI but, it is hellacious from what I've been told!

-- Katie S (cashcrop90@yahoo.com), January 31, 2002.

Hi Katie, If you put a half-gallon (red-dye) in the road-vehicle tank, the entire tank shows the color. That's how they catch you. My brother saw a guy last fall, who pulled into the Exxon in Laurel, MT and starts pumping directly into his fuel tank, when the Highway Patrolman walks up to him and writes him the citiation. What an idiot! $2000 fine. He says they come around and check your vehicle while you're in at the horse shows and cattle auctions.

If you're using red-dye for farm vehicles, have it delivered to your farm/ranch.

-- matt johnson (wyo_cowboy_us@yahoo.com), January 31, 2002.

When I first moved to Texas and went into the feed store to pick up some equine dewormer pastes, I was asked if it was for ranch/farm use. Being the wise-a$$ that I am, I said, 'No, I've just got a hankerin' for the stuff!' -G- That's when I learned that anything that's for ranch/farm use is not taxed.

-- ~Rogo (rogo2222@hotmail.com), January 31, 2002.

Does this apply to Arizona as well?

-- Hank (hsnrs@att.net), February 01, 2002.

In Illinois, we have taken this exemption for years, never had to sign up or "prove" it. Most farm stores just ask us to sign a separate receipt for the tax exempt purchases for their records, but not all do. Check with the person who prepares your taxes, it may be to your advantage to claim a farm. As long as our farm operates with the "intent" to make a profit, we are a farm. For instance, we can take the price of buying the chickens, all their feed, supplement, bowls, wood and fencing and tools to built them a coop, even electricity for their light bulb and water heater (as we have a separate service for the barn), all as a farm deduction on our taxes because we sell the eggs for profit. In reality, the profit from the eggs pays for the price of their feed, that is about all. But should IRS ever audit your farm deductions (which they have us), you need to show your intent is to make a profit over the long haul by buying and selling. We buy new chickens every year or so, sell off the old, sell eggs. They are not our pets, they are our livestock business, second income, farm. You can do the same with all your lifestock but not your pets (i.e.dogs, cats and horses do not quality for farm exempt). What we profit in the sales from the eggs, livestock, hay, etc., will never exceed the farm deductions we took on the barn, coop, fencing, tools, farm truck, tractor, etc., etc.... So, we take the big deductions off of our taxes over many years of depreciation and continue to buy and sell every year thus the IRS does not label us a "hobby" farm. Again, check with your tax preparer about what is allowed in your state. It is great to not have to pay taxes on your animal feed and farm purchases in the stores but....if are able in your state to claim these purchases as farm deductions on your taxes, it could be of great benefit. You need to keep a record of your income and all receipts of your purchases (Oh yeah, cross out that candy bar purchase on the receipt from the farm store!) Our audit even allowed us the deduction of our subscription to CS as it provides education on ways to make a profit on a small scale with your livestock! Scott

-- (Farmerwebb@excite.com), February 01, 2002.

In Virginia if you farm for profit and sell a minium gross off your farm [believe its $1500]then you do not have to pay sales tax on products used in the production of those farm products.As far as off road diesel goes you will be fined for putting it in any vechile that was originally made to run on the road even if it never goes on the road anymore,suchas a unlicensed farm truck that stays on the farm.

-- Gary (burnett_gary@msn.com), February 01, 2002.

The Texas Adminstrative Code Title 34 Rule 3.287 Exemption ertificates regulates and requires and Exemption certificate for farm product purchases. Farm and Ranch purchases are not utomatically exempt from Sales Tax in Texas. In Texas refer to the following: I suppose each state will have similar requirements. Best to check with Comptroller of Public Accounts.

An exemption certificate must be in substantially the form of a Texas Sales and Use Tax Exemption Certification that the comptroller adopts by reference. Copies are available for inspection at the office of the Texas Register or may be obtained from the Comptroller of Public Accounts, Tax Policy Division, 111 West 6th Street, Austin, Texas 78701-2913. Copies may also be requested by calling our toll-free number 1-800-252-5555.

-- milam gerick (milamgerick@juno.com), February 01, 2002.

nyone know the regulations in Oregon?

-- Keith (peepee125@hotmail.com), February 01, 2002.

I checked and find Orgeon has no sales/use tax according to the record by states. Therefore; there would be no need for an exemption.

Pricewaterhouse Cooper did some checking for a client of theirs and concluded the same in an internet topic. search Oregon sales tax on the net and find articles regarding topic.

-- milam gerick (milamgerick@juno.com), February 02, 2002.

You can file for tax exempt status and not have to pay the tax if you have a farm. To obtain this you ahve to sumbit a form with the dealer, country, etc that has your social security number on it. In VA there are no minium profit amounts required, (at least that w ewere informed of) you can claim tax exempt but you have to show you are working towards a profit. Our accountant there did our farm taxes for years and is still doing them despite the fact we moved, she is the best:) So that is how we were able to get tax exempt status.

You can claim mileage going to get feed, business trips to meetings, farms to purchase animals, sell them, etc. It requires that yuou keep accurate records, oh, and Chuck i need to send you that updated expense spreadsheet. I have to re work it and add some more areas. Careful record keeping is critical. You have to demonstrate your intent to make a profit and be a viable business.

Also, unless the laws have changed back in VA in the past 7 months, you still could drive a truck with Farm Use written on it or written on a metal tag, on it, however, it was for only 30 miles.

Farm taxes require a lot of documentation, however, it is a great way to be motivated to make a profit from your farm. It is a lot of aork but worth the efforts.

-- Bernice (geminigoats@yahoo.com), February 02, 2002.