Sales Tax Exemption for Farmers

MSU Extension regularly receives phone calls from farmers asking how to get a tax exempt number. There are a few key things to keep in mind regarding this.

MSU Extension regularly receives phone calls from farmers wondering how they can get a tax exempt number so they do not have to pay sales tax on items used for their farm. There are a few key points that need to be made regarding this matter:

  1. There is no such thing as a “Sales Tax Exemption Number” for agriculture; you should never use your social security number for retail purchases.
  2. Farms are defined as “any place from which $1,000 or more of agricultural products were produced and sold, or normally would have been sold, during the census year. The $1,000 is the gross sales amount.
  3. The key words in the Revenue Administrative Bulletin 2002-15 are “to the extent that the property (purchased items) is used or consumed in connection with the production of qualified agricultural or horticultural pursuits as a business enterprise.”
  4. There are some items that are not exempt for agriculture, such as building supplies for affixed real estate structures. Drainage tile does qualify, as does grain drying equipment and natural or propane gas used to fuel that equipment for agricultural purposes. Further information is available on the State of Michigan Department of Treasury Sales and Use Tax website.
  5. Form 3372, Michigan Sales and Use Tax Certificate of Exemption, is used in claiming exemption from Michigan sales and use tax. Exemption entities may complete the form and place on file with the retail establishment. The person signing the form is attesting that the purchased item being used for agriculture.

Most farm retail businesses simply have a location on the purchase paperwork for the farmer to sign that the purchase qualifies. Retail businesses do not have to accept the Certificate of Exemption; buyers may want to inquire or check with customer service prior to final purchase. Businesses may be audited for compliance; however, proof is on the person asking for the exemption and not on the business.

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