“The variations were due to exemptions being granted on a piecemeal basis through the years, resulting in hodgepodge legislation that was sometimes illogical,” says Huffmaster.

For example, under the previous laws, a tractor purchased for farm use was exempt from sales tax, but the same tractor would be taxable if used in an orchard. Electricity used in poultry houses was sales tax exempt, but electricity used in swine and dairy barns was not.

“The new law, House Bill 386, corrects much of this inequity by declaring that inputs used to produce a product for resale should not be taxed,” says Huffmaster.

The new agricultural sales tax exemption actually began taking shape in 2009, at a time when the U.S. economy was in a nosedive, and Georgia tax revenues were falling dramatically, he says.

“Georgia’s income dropped more than 20 percent in two years, and no one could reasonably predict the end to the downturn. Because Georgia is constitutionally mandated to have a balanced budget, the state cut spending and frantically looked for ways to increase income,” says Huffmaster.

One idea to increase income was to suspend or revoke all sales tax exemptions, he says, but that would have devastated Georgia farmers.

“For example, a 350-cow family-operated dairy might incur $1 million in annual feed costs. If the sales tax exemption were suspended, the dairyman would pay $70,000 in sales taxes on feed alone. Few farmers could absorb such an annual cash expense,” he says.

In 2010, the Georgia General Assembly created a special tax council to study the state’s revenue system and make recommendations to the legislature for improvements. Throughout 2010, the council held a series of public meetings, inviting citizens to make comments about Georgia’s tax policies. At each meeting, says Huffmaster, Georgia Farm Bureau members submitted official testimony detailing how their farms would be affected if sales tax exemptions were suspended or appealed.

In the council’s 2011 report, it recommended that all agricultural sales tax exemptions be retained. Furthermore, it urged that additional exemptions be instituted to cover all input costs. The purpose was not to give farmers a tax break, says Huffmaster, but to keep Georgia agriculture as competitive as possible by eliminating taxes on inputs destined to become products for resale.

A special committee of the General Assembly drew up legislation to incorporate the council’s recommendations, but lawmakers chose not to push forward with the bill in 2011. Early in 2012, the bipartisan bill was passed with little dissension.

“As with any legislation of this size and complexity, there are bound to be hiccups and delays along the way,” says Huffmaster.

“Georgia Farm Bureau will continue to monitor the regulations that are written to implement the sales tax exemptions and work to make sure they work for Georgia’s farmers. Any way you look at it, this tax reform legislation is good for Georgia farmers.

More information on GATE can be found http://www.agr.georgia.gov, and questions can be answered by phone at (855) FARM TAX, or (855) 327-6829.

phollis@farmpress.com