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Serving: OH
coin can lying on top of receipts Gail C. Keck
NICKELS AND DIMES: Farm-use sales tax exemptions can add up.

Exemptions become taxing

The Back 40: Ohio offers sales tax exemptions for purchases used in agricultural production.

If you were behind me in line at the farm supply store, I apologize. But I can’t really say I’m sorry for my actions.

This is one of those blame-dodging apologies like celebrities offer — I’m sorry if you were annoyed or inconvenienced by the delay that occurred, through no fault of my own, during your shopping excursion.

Ohio ag exemptions

Sure, I could have just paid the 42 cents of sales tax on the block of trace mineral salt I was buying for my cows, and we could have all gone home 10 minutes sooner. But, according to Ohio Revised Code Chapter 5739.02 (B)(17), I do not owe sales tax when I buy things my cows will eat. And I am a law-abiding citizen.

The problem was that the farm supply store’s computer system did not include salt blocks as products eligible for a farm-use tax exemption. I told the cashier her computer was wrong, and she didn’t argue. She called over her supervisor.

The supervisor confirmed that the computer classified salt blocks as taxable products. I told the supervisor the computer was wrong. I asked what salt blocks could be used for other than feeding livestock — I might have sounded sarcastic.

At this point the cashier and supervisor realized they were not being paid enough to deal with a difficult customer, so they called over their manager. The manager and I had a nice discussion about cows, salt and customer service; then, he showed the cashier how to override the computer’s taxation classification.

That wasn’t the first time I’ve held up a checkout line over a tax exemption. I’ve never found it to be an issue with companies that deal mostly with farmers, but retailers that serve both the farm and rural lifestyle markets are another matter. Maybe that’s because they’re in the business of selling products, not analyzing how people will be using the products.

The sales tax exemptions, on the other hand, are based on how products will be used. The exemptions are meant for people who are in the business of farming, not people who have expensive rural hobbies.

Confusion reigns

Ohio and nearly every other state offers sales tax exemptions for purchases that will be used in agricultural production. But variation in the rules from state to state is another complication for multistate retailers.

For example, Ohio exempts purchases of tangible personal property such as chemicals, feed, fuel, livestock, machinery and seed that will be used or consumed in agricultural production. However, Illinois only exempts fuel and machinery.

For farmers, the rules can be confusing as well, since agricultural purchases that qualify for sales-tax exemptions are not the same as purchases that can be deducted as business expenses on federal income tax returns.

Other sales-tax exemptions complicate matters as well. For instance, consider a farmer who grabs a Snickers bar on the way through the checkout line when buying parts for an equipment repair. Even though the farmer intends to consume the candy while engaging in agricultural production, it does not quality for an agricultural sales tax exemption.

It is exempt from sales tax in Ohio because it is “food for human consumption off the premises where sold.” I’m not sure how the rules apply if the farmer eats it before getting out the door.

(Please be advised that this analysis is not offered as tax or legal advice. Consult state regulations or your own tax advisers before engaging in any transactions, and don’t blame me if you end up violating some obscure tax law.)

Additional sale tax exemption information is available from these resources online: the Ohioline Ohio State University Extension fact sheet and the  Ohio Revised Code levy of sales tax webpage.

Keck writes from Raymond, Ohio.

 

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