Changes to Farm Sales Tax Exemptions

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Effective July 1, 2014 the NC General Statute that provides an exemption from sales and use tax for certain tangible property, digital property and services purchased by a qualifying farmer for farming purposes is rewritten to amend the definition of a “qualifying farmer.” The new revision also allows certain persons engaged in farming operations who do not meet the definition of “qualifying farmer” to apply for a conditional farmer exemption certificate.

Effective July 1, 2014, for purchases made on or after that date, a “qualifying farmer” is a person who has an annual gross income for the preceding tax year of ten thousand ($10,000) or more from farming operations or who has an average annual gross income for the three preceding income tax years of ten thousand dollars or more from farming operations. A qualifying farmer includes a dairy operator, poultry farmer, egg producer, livestock farmer, crop farmer, or a farmer of aquatic species.

Farmers and farm operations who have qualified in the past must reapply by completing and submitting Form E-595QF, along with income documentation appropriate for the business model of their farming operation.

A person who does not meet the definition of a “qualifying farmer” may apply to the Department of Revenue for a conditional farmer exemption number. A person issued a conditional farmer exemption certificate may purchase qualifying items exempt from sales and use tax to the same extent as a qualifying farmer. The conditional farmer exemption certificate is valid for the income tax year in which it is issued and the following two income tax years, provided the person submits copies of applicable state and federal income tax returns to the Department within 90 days following the end of each income tax year covered by the certificate. The conditional farmer exemption certificate cannot be renewed, however where a person meets the requirements of a qualifying farmer prior or subsequent to the expiration of the conditional farmer exemption certificate, the person may apply to receive a qualifying farmer exemption certificate number.

To apply for a conditional farmer exemption certificate number, complete and submit Form E-595CF.

For further information about changes to the Qualifying Farmer and Conditional Farmer Exemption,  call the Extension Office at (919) 989-5380. There is also a new page on the Department of Revenue site with all applicable forms and pages of Frequently Asked Questions. That page can be found at http://www.dornc.com/taxes/sales/farmers.html