The Farm CPA
Paul is now part of the fourth generation in America that is involved in farming and hopes the next generation will be involved also. Through his blog he provides analysis and insight to farmer tax questions.
Take Advantage of State Programs
Jun 28, 2012
Our blog tends to focus on the federal issues regarding income taxes. Sometimes we forget that state sales, income and other taxes may end up costing the farmer more than federal income taxes.
For example, in Washington state, we do not have an income tax, but we do have sales, property and a business and occupation tax. When you add up all of these taxes, a farmer may pay more in our state than a state with an income tax.
For example, in our state, farmers pay sales tax on consumables that they use in the farming operation such as supplies. They would also pay sales tax on all replacement parts unless they file with the state to be exempt. This replacement part exemption applies to parts used to make necessary repairs to farm equipment. It does not apply to betterment's that are put on farm equipment such as installing a new GPS system, etc.
If a farmer did not know about this exemption and needed to purchase a major repair part for their tractor or combine, the farmer could easily spend $1-10,000 in unnecessary sales tax.
Are you taking advantage of all of the state tax exemptions available to you in your state. For farmers in multiple states, it is even more important to know the rules for each.