DOAG: Sales Tax Exemption for Farmers

Sales Tax Exemption for Farmers


Connecticut General Statutes - Section 12-412(63)

Retail sales of tangible personal property used exclusively in agricultural production are exempt from sales and use taxes provided the purchase qualifies for an exemption and the purchaser has been issued a Farmer Tax Exemption Permit. In order to qualify for the sales tax exemption, a farmer must first apply with the Department of Revenue Service (DRS) by filing Form REG 8 . The form must be forwarded to Taxpayer Services at DRS for review. The application is then either approved or denied. If approved, form OR-248, Agricultural Sales Tax Exemption Permit is issued. Exemption permits must be renewed every two years.  For example, an exemption permit issued in 2014 is valid from October 1, or the date it is issued, (whichever is later) until September 30, 2016. Farmers with a current exemption permit will receive a renewal package. A start-up farmer will initially be issued an exemption permit that is valid for two years from the date it is issued.  When the farmer renews the exemption permit for the first time, the farmer may be issued an exemption permit for a period of less than two years.  This exemption permit will cover a short period until the next regular renewal. A valid permit only provides for a tax exemption on purchases of tangible personal property and not services.  

A copy of the farmer tax exemption permit must be provided to the retailer at the time of each purchase or a blanket certificate may be issued for a continuing line of exempt purchases. A blanket certificate, which is a copy of the original permit with the words "blanket certificate" written across the top, is valid from the date of issuance until September 30 of the following year. If a copy of the exemption permit is not provided to the retailer at the time of purchase, the retailer must collect the applicable sale and use taxes. No sales tax will be refunded for purchases made before the permit is issued.

Who qualifies?

Anyone engaged in agricultural production as a trade or business and who in the preceding taxable year had gross income of $2,500 or more from such agricultural production, or, on average, a gross income of not less than $2,500 for the two immediately preceding taxable years. However, effective July 1, 1995, applicants whose gross income from agricultural production in the preceding taxable year was less than $2,500 may still qualify for a Farmer Tax Exemption Permit provided in the current or immediately preceding taxable year, such farmer purchased an agricultural trade or business from a seller who was issued a Farmer Tax Exemption Permit at the time of such purchase. But if agricultural production is not carried on by such purchaser during the period commencing upon the date of purchase and ending two years after the date of purchase, the applicant will be liable for the sales or use tax otherwise due. Gross income from agricultural production is generally reported on federal Form 1040, Schedule F or Schedule C of the farmer's federal income tax return.

What farming activities are considered agricultural production?

The raising and harvesting of any agricultural or horticultural commodity, dairy farming, forestry, the raising of livestock and poultry, or the raising and harvesting of fish, oysters, clams, mussels or other molluscan shellfish.

Individuals engaged solely in the purchasing of agricultural products for resale are not engaged in agricultural production.

PURCHASES THAT CAN BE MADE TAX FREE WITH A FARMER TAX EXEMPTION PERMIT: A farmer tax exemption permit may be used to purchase goods that will be used exclusively in the agricultural production process. Qualifying purchases may include items such as a farm tractor, truck, or refrigeration equipment as long as the item purchased will be used exclusively in the agricultural production process.

If an item will be used partly in the agricultural production process and partly for other purposes, it is fully taxable.

The lease of equipment used exclusively in agricultural production by a farmer who holds a valid farmer's tax exemption permit is exempt from tax.

For a detailed questions and answers informational publication on farm taxation issues published by the Department of Revenue Services, go to:

 "Farmer's Guide to Sales and Sales and Use Taxes, Motor Vehicle Tax, Estimated Income Tax, and Withholding Tax"