Watch For The State Tax Grab!
Most farmers enjoy certain state tax exemptions that are not always available to other businesses in that state. For example, in my state of Washington, almost all businesses pay a state Business and Occupation (B&O) tax based upon gross sales. As a CPA, our firm pays a 1.8% tax on all of our services performed in the state and there are very little deductions available to offset against this calculation. Most retail and wholesale businesses pay about .5% on their gross sales under this tax. However, this tax does not apply to farmers in our state.
If this tax applied to a farm operation with about 1,500 acres of good wheat land at 100 bushels per acre and $7 wheat, the total B & O tax owed would be about $5,000 that is not owed now.
During our last legislative session, many groups wanted to get this exemption eliminated, however, farmers were able to get their voice heard and keep the exemption. But with states seeming to need more and more money, it is probably just a matter of time before this exemption is gone.
Another area of attack is eliminating the exemption on sales of the purchase of chemicals, fertilizers and repair parts.
Every state has their unique blend of taxes and exemptions. It is very important that you know how this structure affects your farm operation and what you can do to prevent the imposition of more state taxes.
Paul Neiffer is a certified public accountant and business advisor specializing in income taxation, accounting services, and succession planning for farmers and agribusiness processors. Paul is a principal with CliftonLarsonAllen in Walla Walla, Washington, as well as a regular speaker at national conferences and contributor at agweb.com. Raised on a farm in central Washington, he has been immersed in the ag industry his entire life, including the last 30 years professionally. Paul and his wife purchase an 180 acre ranch in 2016 and enjoy keeping it full of animals.
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