PS 91(7.1)

Farmer Tax Exemption Permits

This publication has been superseded byPS 91(7.2)

BACKGROUND: Retail sales of tangible personal property to be used exclusively in agricultural production made on or after October 1, 1989 are exempt from sales and use taxes if made to a person who has been issued a Farmer Tax Exemption Permit (Form OR-248) by the Department of Revenue Services. The permit expires September 30th annually; therefore, a new application for permit (Form REG-8) must be filed annually. This exemption replaced the former exemption from sales and use taxes for retail sales of machinery, materials, tools and fuel to be used directly in agricultural production made before October 1, 1989.

PURPOSE: This Policy Statement describes the procedures that farmers must follow in applying for a Farmer Tax Exemption Permit (Form OR-248) and in making purchases that are exempt from sales and use taxes.

EFFECTIVE DATE: Effective upon issuance and applicable to the Form REG-8 (Rev. 8/92) that is filed for a farmer tax exemption permit covering a period beginning on or after October 1, 1992. 

STATUTORY AUTHORITY: Conn. Gen. Stat. §12-412(63).

PROCEDURES:  

A person issued a Form OR-248 by the Department of Revenue Services must give a copy of the permit to the retailer either at the time of each purchase or at the time of the initial purchase in order to make a continuing line of exempt purchases until the following September 30th when the Farmer Tax Exemption Permit expires.

• If not given a copy of the permit, the retailer will be required to treat purchases as subject to sales and use taxes. Taxes will not be refunded where permits are given after the time of purchase.

• While a Form REG-8 may be filed at any time, the permit will be valid only from the date of issuance until the following September 30th. No refunds will be allowed with respect to purchases made before the date of issuance of a permit (and after the date of expiration of any previously issued permit).

• The permit may not be transferred or assigned and is null and void upon the termination by the permittee of agricultural production as a trade or business.

• The Form OR-248 will be issued to a person who meets all three of the following conditions, the first of which has not been changed and the second and third of which have:

FIRST CONDITION: The person is engaged in agricultural production as a trade or business. To be engaged in agricultural production as a trade or business, a person must both be engaged with a profit motive, and materially participate, in such production. Agricultural production means engaging, as a trade or business, in the raising and harvesting of any agricultural or horticultural commodity, dairy farming, forestry, the raising of livestock( including horses) bees, poultry, fur-bearing animals or wildlife or the raising and harvesting of molluscan shellfish.

SECOND CONDITION: The person has in the preceding taxable year gross income of $2500 or more from sales of agricultural products produced in agricultural production, including livestock, produce, grains and other products raised for sale, as reported for federal income tax purposes. 

• Gross income from sales of agricultural products. Individuals, fiduciaries of estates and trusts, and partnerships must have reported such income on Schedule F or Schedule C (Form 1040, 1041, or 1065, respectively) to the Internal Revenue Service. (Gains that the Schedule F instructions do not permit to be reported thereon will not be considered.) Corporations must complete a Schedule F or Schedule C (Form 1040) to report items of income and expense derived from farming, even though they have not filed such a Schedule F with the Internal Revenue Service.  (Such items must correspond with what was reported on their Form 1120, 1120A or 1120S.)
• In general, cash basis taxpayers will report the income entered on Line 4 of the 1990 Form 1040, 1041 or 1065 and accrual basis taxpayers will report the difference between the income entered on Line 39 and the costs entered on Line 51 of the 1991 Form 1040, 1041 or 1065.  Those elsewhere required to attach a 1990 federal income tax return will report the amounts entered on corresponding lines of such return.

THIRD CONDITION: The person files a completed Application for Farmer Tax Exemption Permit (Form REG-8) and attaches his, her or its complete federal income tax return for the preceding taxable year.

• Preceding taxable year. Those persons who are calendar year taxpayers for federal income tax purposes will attach their entire federal income tax return for calendar year 1991. Others will attach their complete federal income tax return:
if their taxable year ends in January, February or March, for their taxable year beginning in 1991.
• if their taxable year ends in April, May, June, July, August, September, October or November, for their taxable year beginning in 1990.
• If the due date (without regard to any extension) for a subsequent federal income tax return precedes the filing of the Form REG-8, the subsequent federal income tax return (and not the return for the preceding taxable year) must be attached to the Form REG-8. For example, if a calendar year taxpayer files an application for a farmer tax exemption permit on or after April 15, 19943, a copy of the taxpayer's 1992 federal income tax return must be submitted. (If the taxpayer had applied prior to the due date for the 1992 federal income tax return, the 1991 return must be submitted.)
• Same person. In general, the federal income tax return that is attached to the Form REG-8 must be the applicant's. For example, if an individual farmer transfers his farm to a newly organized corporation that he controls, the corporate applicant that is now engaged in agricultural production as a trade or business may not submit the individual farmer's federal income tax return with its Form REG-8. On the other hand, if a farmer dies or retires, an applicant who is the spouse, parent, child or sibling of that farmer may submit that farmer's federal income tax return with his or her Form REG-8.