You may be able to claim that you are farming but unless your interest in farming is profit motivated you will most likely loose. The dealer will probably not have any responsibility as you are the one that told him you are using it for agricultural (farming) use, even though he may have promted you. In Ohio the dealer should ask you to fill out an expemtion form stating your intended use.
Buying new tractor and and dealing with sales tax
- Thread starter ktmpat
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2manyrocks
Super Member
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You could call the Maryland state sales tax division and ask them about the exemption. Home gardening probably doesn't qualify. If you give the dealer a false exemption affidavit, that could come back on you. The dealer will claim he totally relied on your affidavit. The level of enforcement varies. The dealer may never have had a sales tax audit and then he might be the next one audited.
Rara Avis
Veteran Member
2manyrocks said:
With the way state economies are going...anyway they can raise revenue is on the increase...
State Tax audits are on the increase...
Here in Indiana I had to sign an exemption / waiver to knock the sales tax off. But since I was actually building a 35 acre tree farm as a business - I was alright with the accountants and tax guys to go with the Ag exemption (and was not considered a Hobby Farmer). Now I am depreciating the cost of all the equipment against the farm revenue too - further reducing my total cost of ownership.
Another watchout.......if you get caught not actually being a farmer, you not only will get hit with the taxes and penalties, but you may also be at risk of criminal charges for knowingly filing false documentation once you sign the Ag forms (fraud).
Another watchout.......if you get caught not actually being a farmer, you not only will get hit with the taxes and penalties, but you may also be at risk of criminal charges for knowingly filing false documentation once you sign the Ag forms (fraud).
I've already decided two things:
1) don't try and save a little money now that could really cost me much more in the long run.
2) don't do business with this dealer. I'm really surprised they tried to use this as a method to sell a tractor.
1) don't try and save a little money now that could really cost me much more in the long run.
2) don't do business with this dealer. I'm really surprised they tried to use this as a method to sell a tractor.
firefighter9208
Platinum Member
tony123 said:
Be careful calling your farm a "Hobby Farm". According to IRS guidelines a hobby farm has to claim all sales as income, but cannot claim any exemptions or deductions. If a "Farm" doesn't make a profit over the specified time frame the IRS can deem it a "Hobby Farm" and apply this rule.
Some time when you have a few hours or can't sleep read Publication 225 Farmers Tax Guide. Publication 225 (2006), Farmer's Tax Guide
Look down under section 4 Farm Business Expenses. In that section look at Not For Profit Farming.
There's a lot more to it than just claiming you have a farm.
Chris
SnowRidge
Elite Member
Most people don't know about this line from the Pub listed by Chris.firefighter9208 said:
"You can expect to make a future profit from the appreciation of the assets used in the farming activity."
I believe this has been interpreted to mean that if you can expect to sell the land that you are farming or your multi year crops for a profit, then you are indeed farming for a profit.
But don't quote me on that.
firefighter9208
Platinum Member
SnowRidge said:Most people don't know about this line from the Pub listed by Chris.
"You can expect to make a future profit from the appreciation of the assets used in the farming activity."
I believe this has been interpreted to mean that if you can expect to sell the land that you are farming or your multi year crops for a profit, then you are indeed farming for a profit.
But don't quote me on that.
The biggest thing my accountant tells me is that you need to have cash flow and run it like a business. Most small farms are "just a tax write off", but the IRS can make you convert to a "hobby farm" if they deem you aren't serious in you venture.
He says that the IRS looks at income and expenditures before depreciation. When starting a new farm, depreciation of equipment, barns, fences, etc... can throw you into a loss for many years (even though you actually made a profit during the year is you just look at income and expenditures), especially with a small farm.
MikePA
Super Moderator
As you've read, you'll get a lot of responses from people who are more interested in expressing their opinion of taxes and how to avoid them than advising you. Afterall, you'll be the one getting in trouble not them.ktmpat said:
I walked out of my local (NOT Messicks) Kubota dealer when I got the same advice from them. Since we have horses the salesman said, "Yep, you're a farmer." In my case, like yours, he was just trying to make a sale.
If you have to ask yourself the question, "Am I a farmer?" then you aren't one.