From the tractor
by Agriculture Commissioner Steve Troxler
We have recently received a number of phone calls about new tax regulations that went into effect July 1 regarding sales tax exemptions for farms on farm-related items used for planting, cultivating, harvesting or curing farm crops or in the production of dairy products, eggs or animals.
These changes came about through the General Assembly’s income tax modernization in 2013, but they have now become effective. When these changes were first being discussed, they were more far-reaching and even more restrictive. In fact, more changes are on the way in 2015, with taxes coming on State Fair admission tickets and county fair tickets. This is a separate issue that I will likely discuss again in a future column.
But believe me, if I could have stopped any of these, I would have. We fought to keep the exemption for farms, but unfortunately the final resolution illustrates the changing makeup of the legislature, where city-based legislators dominate the majority of the positions. Agriculture-related tax issues and laws will likely continue to face strong challenges as a result.
The new rules include a significant change in the amount of farm revenue required to qualify for the exemption. It is clear those changes are causing concerns for farmers, and I understand why. Some farms that previously qualified for this exemption will no longer be eligible for it.
Farms that have qualified for the exemption in the past were recently sent letters from the N.C. Department of Revenue attempting to explain the changes in the law and steps the farm owners will need to take to continue to qualify for the exemption. This year, every farm that wants to continue to receive sales-tax exemptions will need to reapply by Oct. 1 to continue your exemption, but the Revenue Department encourages you to apply as soon as possible to allow processing time for your application.
I want to be clear that this is a matter for the N.C. Department of Revenue, not for my department, but because we have had a number of calls and there seems to be confusion with the new changes, I wanted to pass along information to try to help farmers get the assistance they need and also provide a number they can contact with questions.
As I understand, one of the biggest changes under these new rules is the qualifying amount of revenue for sales-tax exemption. Previously, that was $1,000 in revenue from your farm. That amount was increased, and now you must have a minimum of $10,000 in revenue in the prior year or an average gross income of $10,000 for the previous three years to qualify. So if your 2013 income was less than $10,000, but you had a higher gross income two years prior, you may still qualify for the exemption.
As part of the application process, you will have to provide supporting federal income tax information. According to a Frequently Asked Questions page on the Revenue Department’s website, you will not need to provide your entire federal tax return, only certain pages and schedules depending on whether you operate your farm as a sole proprietor, an S or C corporation, or a partnership. Here is a link to the FAQ page with more details: http://www.dornc.com/downloads/FAQs_E595_QF_62672014.pdf.
You can find an application on the Revenue Department’s website at http://dornc.com/downloads/e595qf.pdf. You can also call the Revenue Department’s Taxpayer Assistance and Collection Center at 1-877-252-4487 for more information.
If you disagree with these changes, please contact your legislators and let them know how you feel.