# Tax exemption



## Frantz (Feb 18, 2018)

I know how forums and "legal" advise are but I think this is simple enough someone can stick their neck out a little. Pennsylvania has a form REV-1220 for tax exemption, and farming use is an acceptable purpose. Do I just have to fill that form out and give it to my tractor vendors and I'm set? I do my farm income on my SSN via Schedule F for the past 3 years, but it's all new too me. On big purchases I've just used my father in laws account as we live on his farm, but I want to know how to do this right.


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## Farmerbrown2 (Sep 25, 2018)

I file a schedule F and just fill out the form at all the ag dealers I spend money at. As long as you are farming and keeping your records you should be golden. Just remember if it seems illegal it probably is.


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## Frantz (Feb 18, 2018)

Thanks. I'm not worried that it's illegal, I farm and use the equipment for that purpose, it just seemed too easy, and dealing with government that made me pause.


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## NewBerlinBaler (May 30, 2011)

I think the dealers here in PA are afraid they'll get in trouble with the state if they don't collect sales tax. Maybe their fears are well founded.

In any case, they always seem to be nervous about this and make a big deal about it whenever I purchase something & tell them it's for farm use. If you're filing Schedule F, you don't have anything to worry about.


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## paoutdoorsman (Apr 23, 2016)

The businesses that I deal with in this area for farming stuff usually have those forms on hand and have me sign one for them to keep on file the first time I purchase something from them. Ag tires at the tire shop, parts at the Deere dealership, etc.. Select option 1, and fill 'farming' in the blank.


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## VA Haymaker (Jul 1, 2014)

My feeling is - if your a legit farmer, paying taxes, you should be taking your deductions, including sales tax exemptions. I would strongly advise you find a good accountant to help guide you through the tax maze.


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## Vol (Jul 5, 2009)

Here, it is fairly simple. If you file a Schedule F with the IRS, you can then apply to the State of Tennessee for a Ag Tax Exemption Certificate which the State mails to you and then you present that Certificate to your Ag dealer for instant tax exemption. They usually make a copy of your certificate and keep it "on file".

Regards, Mike


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## swmnhay (Jun 13, 2008)

Sales tax gets quite confusing crossing state lines.Not every state is the same in what the exemptions are.SD taxes about everything.But if I buy eq in SD and they deliver it it's not taxed,if I pick it up in SD it is.If I sell some things in SD. And deliver I have to collect tax,if they pickup here in MN I don't charge tax but they are supposed to pay it themselves.(User Tax)

SD taxes twine,netwrap etc if the hay is your own.If you are custom baling it's not subject to sales tax as it is packaging material.

There is also a city sales tax in a lot of towns so if I sell a product at a show in that town they want city sales tax on it


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## Frantz (Feb 18, 2018)

leeave96 said:


> My feeling is - if your a legit farmer, paying taxes, you should be taking your deductions, including sales tax exemptions. I would strongly advise you find a good accountant to help guide you through the tax maze.


The accountant would be the way to go! My operation is secondary to my main source of income and I can't justify the expense. Heck, this is the first year I got liability insurance for the equipment =-X

I look forward to being in a spot where I can afford the "right" way of doing things, but all the legal stuff makes it hard to be a start up farmer (or any business). I am not looking for loopholes, but to effectively and competitively take part in the business environment I need to take advantage of the programs as designed.

Thanks for all the input everyone!


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## luke strawwalker (Jul 31, 2014)

Here in TX it used to be SO simple... all you did was tell them "farm use" at the register and they'd not charge the tax. Then they had you fill out a paper for the tax exemption which they kept "on file" for the gubmint bean counters and for most places you filled out one they kept "on file" you were golden. Then they started requiring you to fill out a new one every year. Not a big deal; basically just your name and address and what you were buying, which I just put "Farm parts and supplies" and then for what use-- "Farm use" and then sign and date it. I could fill them out in my sleep and I could do one at the register in less than 30 seconds...

I only had a problem ONE TIME in all those years-- some snot nosed punk at Hi-Lo Auto Parts refused to ring up a fuel pump for the combine tax-free because, to save time with their primitive computer system, I told him "give me a fuel pump for a 1977 Ford F-150 with a 300 inline six... (which is the same engine the combine had in it). "Since the fuel pump is for a pickup, that's not farm use". "I told you what application to look up, not that it was for a pickup, it's for a combine, but yall don't have combines in your stupid computer!" He was just a know-it-all punk that thought he was a lot smarter than he was, and finally after arguing with him a bit I was like, "I don't have time for this, just ring the damn thing up so I can get back to work". Interestingly enough, I saw a "Texas Comptroller of Public Accounts" poster near the register marked with "tax questions" and jotted the number down. That night I called their hotline, and this woman told me, "this punk said I have to have a tax ID number to get farm use, and all this crap-- is that true?" "NO!", she said, "that's not accurate. Only schools and municipalities get tax free with a tax ID number... farms, forestry, and churches only have to sign the form they keep on file... We don't require farms, forestry, and churches to get state tax ID numbers-- if we did, we'd need a WHOLE NEW BRANCH of the government just to issue and rescind tax ID numbers-- do you have ANY IDEA how many farms and churches start up every year, and how many go broke or quit? All you have to do is tell them "farm use" and sign the form for them to keep "on file" and they MUST give you your purchase sales tax free-- if they don't, you can tell them to call this number..." "Thanks" I said.

SO, a few days later I need some other part and I call the punk's bluff-- and I make him call the number... Well, after getting off the phone he turned about three shades of red, wouldn't look me in the eye, and rang me up right quick-- tax free...

I guess they finally got their "whole new branch of the gubmint" because now you have to apply for a state tax ID number... it's a pretty simple thing, basically an online deal or you can pick up or print off a form and mail it in-- basically the same as the old "over the counter on-file form" at the dealership, but for the state... then them mail you a little cut-out thing on a sheet of paper about as sturdy as Kleenex that you cut out and carry in your wallet for the next five years (until it dissolves or is unreadable). I finally just started snapping a picture of it with my phone and keep it in my phone handy, because now the "over the counter on-file" form requires you to write in the tax ID number along with your name, address, and "farm supplies" for "farm use" and sign it once a year as well... There's no specific requirements to "prove" your farming or ranching or whatever, but I guess they DO check up on stuff... I dunno.

Anyway, at least it's halfway simple. Had to get a federal excise tax ID number about 20 years ago for the farm to buy farm diesel tax free... that was a little more complicated but not bad.

The biggest PITA about the state sales tax ID number is, a few years ago they coupled it to the "farm truck" plates... Used to be, you just registered your truck as "farm truck" when you bought it or changed uses, and got the cheaper (maybe 10 bucks cheaper) farm plates for it... meaning "not to be used to go to/from off farm jobs-- personal use is okay, to/from school (college or taking your kids), or going to church is okay... just not to/from an off-farm job... And of course the cops are usually jerks about it and will try to trip you up (they tried to get Betty when she took my truck one day, because she was taking Keira to school, which is fine, but the [email protected] Nazi-Gestapo friggin cop didn't want to believe it, even though it's IN THE LAW... which yeah bugs the crap out of me when a cop is that way...) Anyway, NOW you have to present a "farm use Tax ID number" to get farm plates... for a long time, we just had it in Dad's name-- after all the farms were his and I was just his "agent" working for him, so anything I bought was technically "for him for the farm" and a number is a number so who cares?? Well, the tax office refused to issue me new farm use tags because his name was on the farm use tax ID number scrap of paper instead of mine, and the truck is registered in my name... so I had to go home, go online, and register for a friggin' stupid tax ID number, which is in my phone too now... so long as the names match on the plate renewal and ag tax number they're cool with it... more needless bureaucracy though...

Then of course we had to change it from Dad's name to Mom's after he passed away... which wasn't too bad... Betty did it online...

Later! OL J R


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## RockmartGA (Jun 29, 2011)

In Georgia, you fill out a form and recieve a GATE (Ga Agriculture Tax Exempt) card to present to vendors. I think there is an income requirement that is meant to prevent hobby farmers from abusing the system, but it is very low (about $2500 I think...)


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## luke strawwalker (Jul 31, 2014)

RockmartGA said:


> In Georgia, you fill out a form and recieve a GATE (Ga Agriculture Tax Exempt) card to present to vendors. I think there is an income requirement that is meant to prevent hobby farmers from abusing the system, but it is very low (about $2500 I think...)


Interesting reading how they do it elsewhere... I take it GA has income tax, and therefore can verify the income easily? TX doesn't (yet).

Hobby farmers abuse lots of things... but the way things are going they're about all that's going to be left in the end I'm afraid...

And, h3ll, what's a hobby farmer anymore, really?? Every farmer I know (hobby or not) has to work an off-farm job to make ends meet anyway... I guess my definition of "hobby farmer" is the guy who just piddles about with horses or a half-dozen head of cows who couldn't even make good beer money off of yet has a $150,000 barn a $80,000 diesel pickup and $100,000 worth of new hay equipment...

Later! OL J R


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## Palmettokat (Jul 10, 2017)

I understand in SC you must have farm income to be able to claim sales tax exempt. I keep running into businesses that do not understand it.

Frantz, a good accountant should not cost you. To me they ought to be saving you as much as they are charging you. My accountant is a single accountant who's wife did work with him till she passed but he does insurance tax return, rental house, farm and personal income return for less than a $1,000. Now he does charge me for payroll on top of the tax return but still cost less than my doing it. Ask around, they are out there. One thing will warn you about if possible find accountant who does farmers tax return. Once in while I have to tell mine....expense is legit...claim it.


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## swmnhay (Jun 13, 2008)

Not all tax people are accountants and on top of all the tax rules.Some just punch the numbers into the computor and say here it is.

My new accountant went over previous 3 years and found I pd $4000 to much in taxes.Refiled them and I got reimbursed.


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## swmnhay (Jun 13, 2008)

The local farm supply stores got stricter on what they charge sales tax on after they got hit with a huge tax bill after a audit.Gates and fencing are taxed even though what I have bought are totally for cattle use.

Grease is taxed.

A lot of small stuff is taxed if it could be used other then farm use.


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## Vol (Jul 5, 2009)

swmnhay said:


> The local farm supply stores got stricter on what they charge sales tax on after they got hit with a huge tax bill after a audit.Gates and fencing are taxed even though what I have bought are totally for cattle use.
> 
> Grease is taxed.
> 
> A lot of small stuff is taxed if it could be used other then farm use.


Same here, grease, oil, etc. all taxed now. It just about has to be a farm exclusive item to avoid taxation. Gates and farm fencing are not taxed here.

Regards, Mike


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## swmnhay (Jun 13, 2008)

Now about every city is adding a sales tax on top of the state sales tax for some pet project they have.Adds up!!!


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## Frantz (Feb 18, 2018)

So to make me feel better, I did take the advice here and talked with a CPA I got as a local referral. My thinking was straight on the PA REV1220, but I feel much better having someone professional tell me it. Also gave some good advice on things I can write off and I'll be working with them on my schedule F this year. On one hand I'm not a big enough operation to really justify the cost, but on the other, I think getting things done that much better now will get me to that point sooner.


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## endrow (Dec 15, 2011)

Frantz said:


> I know how forums and "legal" advise are but I think this is simple enough someone can stick their neck out a little. Pennsylvania has a form REV-1220 for tax exemption, and farming use is an acceptable purpose. Do I just have to fill that form out and give it to my tractor vendors and I'm set? I do my farm income on my SSN via Schedule F for the past 3 years, but it's all new too me. On big purchases I've just used my father in laws account as we live on his farm, but I want to know how to do this right.


 maybe you should consider joining the Pennsylvania Farm Bureau . We use a pfb accountant. We would agree it pays to use an accountant that specializes in agriculture


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## Palmettokat (Jul 10, 2017)

My opinion is worth little here but I think when the IRS is looking at who to audit they are less likely to audit those who use an accountant or firm who has good reputation with them on doing honest returns. If you listen you often find there is tax preparer who seems to brag about all their audited clients.


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## Frantz (Feb 18, 2018)

I am a PFB member as of this year as well. The fellow I met with doesn't specialize specifically in farming but he has other farm accounts, he is around my age, and willing to work with someone as small as my operation so I'm happy to this point.


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## r82230 (Mar 1, 2016)

I'm going to put a plug in for CPAs here.

CPAs are *REQUIRED* to take *CERTAIN* number of continuing education courses, whereas accountants/tax preparers *MIGHT* take *SOME* continuing education courses (or take none ).

Tax laws change almost continuously, because a fair amount of changes are sometimes determined/changed by court decisions. And court decisions are sometimes graphical, therefore would/could need to be tried in different courts to apply to everyone in the US. Usually decisions come out of Federal District Courts, (if you notice). Then someone in another district has to take it to court to get ruling in THEIR district (ah, wonder if attorneys are involved? ).

As a point of reference, my tax return consists of a 1040 (personal return), a schedule C (my off-farm business) and a schedule F (the farm naturally). I have no pay-roll with either my schedule C or F (I don't pay my wife, at least in theory anyhow ). I do have 1099s, mainly with my schedule C. The only time a 1099 is produced from the farm is if I pay someone (landlord) more than $600 in one year. Note: I'm now including my Vet in that equation. I had a client/farmer that just got through settling with the IRS for around to $20K, for failure to issue 1099s, partially to his Vet (milking 240 cows, I imagine his Vet bill would be substantial). The total bill to my CPA for my 2017 taxes was &#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;&#8230;. $350.

Anyone can prepare tax returns, no schooling, no testing, no nothing, just hang a shingle out and put their info on the tax return (if done even, I know of some folks whom do returns without filling that part on the 1040 in even). As a side note - it use to be for $50 (IDK present cost), you could pay the IRS and get a 'endorsement' that you could add to your business material, that said something along the line 'enrolled agent by the IRS' or 'enrolled agent to practice in front of the IRS'. There was not a test, quiz, nothing but send them $50 and add to your letterhead.

Now if you think about the rational for NOT requiring schooling, testing, continuing education for a minute. Why would the government (IRS) want tax returns done correctly? A hidden tax (plus penalties / interest), is the government's windfall it would seem. The farmer that just settled with the IRS got his letter in 2017, just before the 3-year deadline (audit was his 2013 tax return, they have up to three years from the date your return is due to audit, unless fraud is involved, I believe). So, he ended up with over 3 years of interest on top of the penalties!

I'm getting off my 'soap box', go ahead and slap me.

Larry


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## mlappin (Jun 25, 2009)

Indiana is pretty simple, fil out form ST-105 with each of your vendors, done.

However Indiana is getting to be a real prick on some things. If you buy a load of firewood at the hay auction you pay sales tax on that as it's considered a fuel.

I have three CPA's in the family, some of the tax law is interpreted differently by each one.


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## haybaler101 (Nov 30, 2008)

My CPA runs me about $2200 a year, but he does my wife and my joint return on the farm, the LLC for the turkey operation, and returns for all 3 kids. Plus files fuel tax exemptions and issues 1099’s. My family has used this firm for at least 40 years and they stay on top of tax law changes, especially concerning agriculture. My comment to him each year, I don’t care what you do to keep me from paying taxes, just know when you sign the return, it entitles you to the prison cell next to mine.


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## Vol (Jul 5, 2009)

haybaler101 said:


> My comment to him each year, I don't care what you do to keep me from paying taxes, just know when you sign the return, it entitles you to the prison cell next to mine.


The IRS doesn't want to put you in prison.....they just want all of your assets. Besides, you would come off of the tax roll in prison and the IRS surely doesn't want that. 

Regards, Mike


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