It’s official: Farms remain exempt from state sales and use tax | Michigan Farm News

It’s official: Farms remain exempt from state sales and use tax

Category: Politics

by Nicole Sevrey, Michigan Farm Bureau

MFB Legislative Counsel Rebecca Park discusses HB 4561 and 4564 with bill sponsor Rep. Dan Lauwers before the Senate Ag Committee hearing.

Farmers across the state can breathe a little easier after Lieutenant Governor Brian Calley signed into law legislation to protect agriculture’s sales and use tax exemptions and put an end to misinterpretations by the Department of Treasury.

Strongly supported by Michigan Farm Bureau (MFB), House Bills 4561 and 4564 are now officially Public Acts 113-114 of 2018.

According to MFB Legislative Counsel Rebecca Park, Representative Dan Lauwers played a critical role shepherding the bills through the process, accompanied by prominent backing of Michigan’s largest general farm organization.

“We’re grateful for Rep. Lauwers’ leadership while navigating through several committee hearings, amendments to the bills, and four different votes between the House and Senate,” said Park. “And if it hadn’t been for our members voicing their support, I don’t know that we’d have had the same outcome.”

In total, more than 600 farmers sent over 1,800 emails to representatives, senators, and the Governor. And that doesn’t include the numerous personal conversations between county Farm Bureau members on the issue.

Rep. Lauwers, a farmer himself, said the legislation was a common-sense solution to eliminate confusion and make certain modern agriculture equipment and technology remain exempt from a tax they were never historically charged.

“With a potential $293 million additional tax burden at stake for farm families, the passage of this legislation was paramount,” Lauwers said. “In the current farm economy, profit margins can be quite slim. And with input costs rising and fluctuating market conditions, farmers need to have the ability to reinvest with confidence in their land, buildings and equipment rather than pay additional taxes.”

In summary, the law clarifies that direct and indirect farm-related equipment purchases are not subject to the sales and use tax. It also allows tangible personal property such as heating and cooling, water systems and milking systems to remain eligible for the agriculture sales and use tax exemption.

Additionally, the legislation addressed past, present and future Treasury interpretations by providing a retroactive statement on the updated definitions so that as audits are conducted, the new definitions will be used for any applicable tax years.

Park added that the bills also provide much-needed guidance on greenhouse operations.

“The law outlines that greenhouse structures that can be disassembled and reassembled without affecting functionality, and all direct equipment used in the operation are not subject to the tax,” she said.

Lt. Governor Calley also signed House Bills 4562-4563 into law as Public Acts 111-112 of 2018. While not directly in the spotlight, the bills were noteworthy in that they authorize continuation of the Agricultural Disaster Loan Origination Program.

“The program was created in 2012 to aid fruit growers who lost significant amounts of their crop due to spring temperature fluctuations,” Park said. “While the program isn’t currently funded, maintaining the policy language keeps a structure intact for the state to provide low-interest loans to growers, producers, processors, and some retail establishments to alleviate financial distress caused by crop damage directly attributable to natural disasters.”