August 2018

Why Sales Tax Exemptions Are Important To Farmers


By Colton Faull

The 35th president of the United States, John F. Kennedy, once said, “The farmer is the only man in our economy who buys everything at retail, sells everything at wholesale and pays the freight both ways.” His sentiment still rings true today.

“Farmers, for the most part, don’t dictate the price of their good they produce, but they have to buy things for the input costs – seed fertilizer, diesel, equipment to grow whatever they’re growing, animal or plant,” says Jeff Pitchford, Director of Public Policy & State Affairs at Arkansas Farm Bureau.

According to fellow Arkansas Farm Bureau spokesperson, Matt King, net farm income and agriculture have declined 50 percent over the past five years. “Incomes across agriculture are down substantially,” he says. Sales tax exemptions plays an important role to help farmers minimize their costs.

In the 2017 legislative session, a taskforce was created to help identify which sales tax exemptions would be appropriate. They will have a report out by the end of the year with recommendations for the 2019 legislative session.

“To their credit, they have covered the gamut of all taxes. We’re talking about sales taxes, sales tax exemptions, they’ve had discussions on income tax and property tax,” says Pitchford. “Obviously, taxes are a big issue to farmers, ranchers and those in agriculture around the state, particularly sales tax exemptions. We have several of those in Arkansas that are important to us.”

One of the issues legislators are looking into is whether or not to keep sales tax exemptions on ATVs. Right now it falls under the exemption as equipment used exclusively and directly for farming. Pitchford says a lot of farmers around the state use their ATVs every day to check on things at their farm, like cattle or levies.

“Some legislators feel like there could be some abuse there at the vendor dealer seller level. Suddenly, everybody that buys an ATV says ‘I’m a farmer,’” explains Pitchford. “So, there’s a little bit of interest from some legislators saying ‘maybe we need to do something there.’ That’s really been the only one that has a real direct one right now but they have been looking at it pretty handedly.”

Instead of completely getting rid of the sales tax exemption altogether, the Arkansas Farm Bureau believes there’s another way around it, such as issuing ID cards to farmers in order to avoid paying sales taxes.

“Our biggest thing is the sales tax exemptions and keeping those in place,” says Pitchford. “The sale of cotton, the sale of seed used in agriculture, the sale of agri-fertilizer, other chemicals herbicides vaccines and medications that are used to treating livestock… The idea of those exemptions going away would mean that suddenly the farmer, the rancher or the producer would have to take on those costs.”

In 2016, Arkansas ranked 16th in the nation in agriculture, grossing $8 billion dollars, according to the University of Arkansas Division of Agriculture Research & Extension. “We’re very protective of these exemptions,” says Pitchford. “They keep us competitive. But they also keep some of our farmers in business.”

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