Recently, the legislature and the governor signed House Bill 1050 that provides some changes for sales tax exemption when purchasing farming inputs. Farmers must have $10,000 of gross farm income from the preceding tax year in order to qualify for the exemption on farm inputs exempt from sales tax. Or farmers must have $10,000 of gross farm income as an average of the preceding 3 taxable years. Prior to January 1, 2014, there was no income requirement.
There is a Conditional Exemption that may be useful to beginning farmers. The conditional exemption certificate, which is valid for the taxable year in which it is issued and the two subsequent years, may be applied for by beginning farmers who certify that they intend to engage in farming. State and federal income tax returns must be provided to the Department of Revenue within 90 days of the end of each tax year the certificate covers. Form E-595CF, Application for Conditional Farmer Exemption Certificate Number for Qualified Purchases can be found at:
HB 1050 also states that qualifying farmers who have an agricultural exemption certificate number issued prior to July 1, 2014 will need to apply for a new agricultural exemption certificate. Technically, that should be done before July 1, 2014. Form E-595QF, Application for Qualifying Farmer Exemption Certificate Number for Qualified Purchases can be found at:
If farmers have an agricultural exemption certificate number that was issued prior to July 1, 2014, they may continue to use this on qualifying purchases through October 1, 2014. However, if the exemption certificate is not valid, the holder must notify vendors and pay sales tax on those purchases that are now none qualifying.
The Sales and Use Tax Division has added an Important Notice: Qualifying Farmer and Conditional Farmer Exemption. The Division has issued notice covering recent law changes to what constitutes a qualifying farmer and sets out the amended law that added a conditional farmer exemption. The notice can be found at:
Bottom line, farmers will need new agricultural exemption certificate numbers. Both forms and the Important Notice are available in the Extension Office in Room 123.
For the answers to see some frequently asked questions, be sure to check out this FAQs list that has been devised since the letters have been sent out.