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Published on 12/06/12

Sales tax rules changing for Georgia farmers

By Merritt Melancon

Farmers looking to maintain their current sales tax exemptions on agricultural supplies in 2013 will have to apply for a new state certification before heading to their local supply store.

Under new state tax rules passed this spring in House Bill 386, farmers must register with the Georgia Department of Agriculture in order to use current farmers’ sales tax exemptions. The same new law expands the range of products that are sales tax exempt for farmers.

“The new G.A.T.E. ID card will provide a more streamlined process when making qualified purchases on items used on the farm,” said Bo Warren, director of business development with the Georgia Department of Agriculture. “Our department determines who is eligible to participate in the program while the Georgia Department of Revenue will determine what specific items are exempt under the program.”

Under the new rules, retailers will no longer fill out the ST-A1 sales tax exemption forms when farmers buy their supplies. Instead, farmers will present a certificate of tax-exempt status that will be issued by the Department of Agriculture, and sales tax will not be charged.

Farmers started registering their operations with the Department of Agriculture on Nov. 15. So far more than 5,000 have applied for their tax exemption certificates, Warren said.

Producers can register by mail, by phone or online, but so far about 90 percent have applied through the department’s website.

There are four primary areas in which producers may qualify. Farmers who make more than $2,500 from their fields each year qualify for the sales tax exemption, but so do many value-added producers and farm-related businesses.

Those who perform $2,500 of some farm-related services are eligible, including people who maintain timberland or land that is kept in a conservation easement and farmers who have new orchards or other long-term crops that will one day produce $2,500 worth of produce in a year.

“Once agricultural producers have registered with the Georgia Department of Agriculture and received their sales tax exemption certificate, doing business with multiple vendors or new vendors during the year will be simpler than in the past,” said Keith Kightlinger, an Extension economist and Georgia farm tax expert. “Instead of obtaining, completing and providing a Form ST-A1 to each vendor, the farmer or rancher will only have to present their state-issued certificate.”

However, the new GATE program will also mean that the farmer or rancher will have to renew his or her sales tax exemption and pay a processing fee each year, Kightlinger noted.

The new legislation expands the description of many sales tax exempt products, which will in many cases remove confusion over whether or not a specific product qualifies for the tax exemption, Kightlinger said.

One area clarifies the definition of agricultural production inputs to specifically include “…ice or other refrigerants, including, but not limited to, nitrogen, carbon dioxide, ammonia and propylene glycol used in the processing for market or chilling of agricultural products.”

Another section provides more specific information on the energy used in agriculture, listing propane, butane, natural gas, wood, wood products and wood byproducts as eligible energy sources and “…electricity or other fuel used in the drying, cooking or further processing of raw agricultural products, including, but not limited to, food processing of raw agricultural products.”

A full list of the new definitions is available in sections 5-2 and 5-3 in the text of House Bill 386, which can be found here: www.legis.ga.gov/Legislation/en-US/display/20112012/HB/386.

The public can review and comment on the current draft definitions until Dec. 20. The Georgia Department of Revenue will finalize the list of tax-exempt items before the New Year.

Those seeking information on applying for tax-exempt status can visit the Department of Agriculture’s website at www.forms.agr.georgia.gov/GATE.

Those wanting to comment on the tax-exempt list can visit http://etax.dor.ga.gov/inctax/proposed_regs/11-15-12__Notice_SUT_2012-011_Agriculture_Regulations.pdf.

Merritt Melancon, a public relations manager for the UGA Terry College of Business, previously served as a public relations coordinator for the UGA College of Agricultural and Environmental Sciences and UGA Extension.

Authors:
Merritt Melancon
Experts/Sources:
Keith D. Kightlinger
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