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PS 91(7.4)

Procedures on Applying for a Farmer Tax Exemption Permit

This publication has been superseded by PS 91(7.5)

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

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 Form OR-248, Farmer Tax Exemption Permit, by the Department of Revenue Services (DRS). The permit expires September 30th annually; therefore, a new Form REG-8, Application For Farmer Tax Exemption Permit, must be filed annually. The exemption, originally enacted in 1989, was amended effective October 1, 1993 to include fish hatcheries in the definition of agricultural production and to allow the applicant to file a federal Form 1040, Schedule C or Schedule F with the completed Form REG-8. The exemption was amended effective July 1, 1995 to eliminate from the definition of agricultural production, "the operation or management of a farm and its buildings, tools and equipment."

STATUTORY AUTHORITY: Conn. Gen. Stat. §12-412(63), as amended by 1995 Conn. Pub. Acts 359.

EFFECTIVE DATE: The information contained herein is effective from the date of issuance of this Policy Statement.

PROCEDURES: A person issued a Form OR-248, Farmer Tax Exemption Permit, by the DRS 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:

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 fish or molluscan shellfish.

NOTE: Persons who purchase standing timber or who cut timber and resell the logs to a mill are not considered to be engaged in agricultural production. Likewise, persons who board and/or train horses are not engaged in agricultural production.

SECOND CONDITION: The person has in the preceding taxable year gross income of $2500 or more from agricultural production as reported on federal Form 1040, Schedule C or Schedule F.

  • Gross income from agricultural production. Individuals, fiduciaries of estates and trusts, and partnerships must have reported such income on federal Form 1040, 1041, or 1065, Schedule C or Schedule F 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 for informational purposes a federal Form 1040, Schedule C or Schedule F to report items of income and expense derived from farming, even though they do not file such a Schedule C or Schedule F for federal income tax purposes. (Such items must correspond with what was reported on their Form 1120, 1120A or 1120S.) Any applicant submitting a Schedule C must include a list of the agricultural products raised by the applicant and the amount of sales from each product

NOTE: Effective July 1, 1995, a person may qualify for a Farmer Tax Exemption Permit if in the current or preceding taxable year the 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 the agricultural production business is not carried on by the purchaser for at least 5 years from the date of purchase, the applicant will be liable for the sales or use tax otherwise due on items purchased during that period.

THIRD CONDITION: The person files a completed Form REG-8, Application For Farmer Tax Exemption Permit, 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 the preceding calendar year. 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 the preceding calendar year; or
    • their taxable year ends in April, May, June, July, August, September, October or November, for their taxable year beginning in the calendar year prior to the preceding calendar year.

  • 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.

EXAMPLE:

If a calendar year taxpayer files an application for a Farmer Tax Exemption Permit on or after April 15, a copy of the taxpayer's federal income tax return for the preceding year must be submitted. (If the taxpayer had applied prior to the due date of the preceding year's federal income tax return, the return for the year prior to the preceding year 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.

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. Attach a note explaining your relationship to the taxpayer whose return you are submitting.

 

EFFECT OF THIS DOCUMENT: A policy statement is a document that explains in depth a current department policy or practice affecting the liability of taxpayers. Unlike a Ruling, a Policy Statement does not apply a policy or practice to a specific set of facts but it may be referred to for general guidance by taxpayers. Unlike a Special Notice, it does not announce a new policy or practice in response to changes in state or federal laws or regulations or to judicial decisions.

EFFECT ON OTHER DOCUMENTS: PS 91(7.3) (Issued 8/2/94) is modified and superseded.

RELATED FORMS AND PUBLICATIONS: For related forms and publications please request:

IP 93(1.3), Farmer's Guide to Sales and Use Taxes
IP 93(3), Q and A on the Connecticut Use Tax for Business and Professions
IP 92(1.3), Q and A on Sales and Use Taxes for a New Business
REG-8, Application for Farmer Tax Exemption Permit

PS 91(7.4)
Sales and use taxes
Issued: 7/26/95
Replaces PS 91(7.3), Rev. 8/2/94