Understanding are farmers exempt from sales tax is more than a technical curiosity—it’s a financial lifeline for agricultural businesses. Across the U.S., states handle farm exemptions differently, with some offering broad relief on equipment, feed, and fuel, while others impose strict limitations. The lack of consistency creates costly confusion, leaving many farmers either overpaying or exposing themselves to compliance risks.
That’s where Hands Off Sales Tax (HOST) comes in. By specializing in multi-state sales tax compliance, HOST helps farmers cut through the red tape, secure every exemption they’re entitled to, and keep their focus on what matters most—growing their business.
How Agricultural Exemptions Generally Work
Let’s get straight to the field: understanding how agricultural tax exemptions are structured helps farmers and agribusinesses save money, stay compliant, and avoid headaches.
Core Exemptions Most States Offer
Agricultural exemptions typically cover tangible items that are directly used in production agriculture. Common categories include:
- Equipment & Machinery — Tractors, harvesters, combines—if used exclusively or primarily (often 50%+) for farming—can qualify for full or partial exemptions.
- California: Offers partial exemption on state portion (e.g., deduct 5% from a 9% rate), but only if machinery is used at least 50% in farming and meets other criteria.
- North Dakota: New farm machinery has a reduced gross receipts tax (3%), while used machinery and repairs (excluding tires) are exempt when used exclusively for agriculture.
- Feed, Seed, Livestock, Fertilizer, Pesticides — These supplies are generally exempt if used directly in agricultural production.
- Indiana: Tools, equipment, seeds, and safety gear used directly in crop care or livestock care are exempt, provided use is predominantly agricultural.
- Tennessee: Fertilizer, pesticides, feed, and livestock feeds fall under the agricultural exemption (specific items listed).
Usage Conditions: Exclusive or Primary Use
States typically impose clear-use thresholds:
- “Exclusive use” means 100% of time in agriculture
- “Primary use” often means 50% or more of the time—used in California and Indiana rules above
Variability Across States
- Every state defines its own list of exempt items and the documentation required—what’s exempt in one (e.g., grain bins or solar installations in California) may be taxable elsewhere.
- As an example, Texas also grants exemption for feed and work-animal supplies, but not pet food, even if labeled similar.
In short, states provide valuable exemptions for items critical to farming operations—but the eligibility hinges on how the item is used, state definitions, and compliance documentation.
State-by-State Overview of Agricultural Exemptions
Let’s explore how different states structure agricultural sales tax exemptions—from partial relief programs to broad coverage of equipment and supplies. This guide highlights representative examples, emphasizing how policies vary across the U.S.
California: Partial State-Only Exemption & 50% Use Rule
In California, farm equipment qualifies for a partial exemption on the state portion of the sales tax—but local and district taxes still apply. To benefit, the equipment must be used at least 50% for agricultural production. Farm-related exemptions extend to items like diesel fuel, LPG, and solar facilities tied to equipment, providing broad relief for qualified operations. Key certificates include:
- CDTFA‑230‑D for machinery and equipment
- CDTFA‑230‑G for diesel and farm equipment
- CDTFA‑230‑N for LPG, etc.
Multiple certificates are available through the CDTFA’s agricultural publications portal.
Texas: Ag/Timber Exemptions & Ag/Timber Number
Texas offers extensive exemptions for agricultural and timber operations. These include:
Machinery, irrigation components, livestock facilities, electricity, and feed
Purchasers must hold an Ag/Timber Number and issue Form 01‑924, the Agricultural Sales and Use Tax Exemption Certification, at the point of purchase. Notably, some supplies like pet food remain taxable.
Connecticut: Full Exemption for Exclusive Farm Use
Connecticut provides a full exemption on tangible goods used exclusively in production agriculture. Farmers must obtain and present the OR‑248 permit to claim this benefit, often providing 100% exemption—subject to documentation.
Tennessee: Supply-Focused Exemptions
Tennessee exempts essential agricultural supplies like feed, fertilizer, equipment, and fuel, provided the farmer presents adequate documentation. This relief supports everyday farming operations across the state. (Available through Tennessee’s government resources.)
Virginia: Broad Coverage for Livestock, Equipment, Supplies
Virginia’s exemption covers:
- Livestock and feed
- Agricultural machinery
- Veterinary drugs and farm chemicals
This wide-reaching policy helps farmers mitigate the cost of essential inputs across the production cycle.(Reflects VEDP policy summaries for agriculture.)
Pennsylvania & Florida: Production-Integrated Rules
These states require that qualifying purchases be integrated into the production process (e.g., seed used for crops grown and sold). Exemptions often involve custom rules fitting the nature of operations and require state-specific documentation.
Notable Mentions: Minnesota & Iowa
- Minnesota: Offers agricultural production exemptions, typically based on documented farming use.
- Iowa: Grants exemptions only if the farmer proves eligibility, often requiring written support or certificates.
Summary Table
| State | Exemption Highlights |
| California | Partial state tax relief; 50% use threshold; multiple certificate options |
| Texas | Agriculture/timber exemption with Ag/Timber Number & 01-924 certificate |
| Connecticut | Full exemption for exclusive farm use via OR-248 permit |
| Tennessee | Exemptions for feed, fertilizer, equipment, fuel with documentation |
| Virginia | Broad coverage for feed, chemicals, equipment, livestock supplies |
| PA & FL | Production-integrated purchase rules; custom documentation required |
| Minnesota | Exemptions tied to documented agricultural use |
| Iowa | Requires proof of eligibility to qualify |
Understanding each state’s approach empowers farmers and agribusinesses to claim all available exemptions—and save significantly in tax costs.
Common Elements Across States
To navigate agricultural sales tax exemptions effectively, it’s essential to understand the core themes that recur across multiple jurisdictions—from usage thresholds to documentation standards.
Primary-Use Threshold
Most states require that exempt items be used either exclusively or primarily for agricultural operations—typically meaning 50% or more of total use supports farming. For example:
- Tennessee mandates that equipment and tangible property qualify for exemption only if used primarily in agricultural operations.
- Illinois imposes strict definitions of “production agriculture,” meaning seemingly farm-related uses—like mowing or excavating—may not qualify, even if agricultural in function.
Scope of Exempt Items
Tax exemptions for agricultural use commonly apply to a wide range of inputs, including:
- Equipment & Machinery (tractors, harvesters, irrigation systems)
- Fuel & Utilities, especially dyed diesel or electricity used in farm operations (e.g., Tennessee)
- Seeds, Livestock & Feed, usually if used in production agriculture
- Building Materials, such as barns or grain bins, when used for farming
- Renewable Infrastructure, like solar panels powering farming machinery in California
Each state curates its own list, so it’s vital to match categories to local definitions.
Required Documentation
Claiming these exemptions consistently depends on proper paperwork:
- Exemption Certificates are universally required—e.g., California’s CDTFA‑230‑D, Texas’s Form 01‑924, and Virginia’s ST‑18
- Primary-Use Affirmations, often signed declarations stating usage thresholds or intent
- Renewal Cycles, since certificates may expire or require re-submission periodically
Summary Table
| Element | Key Requirement |
| Primary-Use | ≥50% agricultural use required in most states |
| Exempt Items | Equipment, fuel, seeds, buildings, utilities, etc. |
| Documentation | State-specific certificates, usage confirmations, renewals |
Decision Tree: Are Your Purchases Eligible for Exemption?
Here’s a clear, practical decision guide to help farmers and agricultural businesses determine whether their purchases qualify for state-level sales tax exemptions. Use this decision tree to streamline your eligibility checks and tax compliance process.
Step 1: Are You a Qualifying Farmer?
First, confirm whether you meet your state’s definition of a farmer—based on income thresholds, agricultural activity, or required registrations.
- North Carolina, for example, requires at least $7,500–$10,000 in farm income to qualify for agricultural exemption certificates.
- In Texas, only persons producing agricultural or timber products for sale are eligible for an ag/timber number.
Step 2: Is the Item Used Exclusively or Primarily in Farming?
Check if the purchase is used for farming purposes:
- Does the usage exceed 50% of total use?
- Examples for qualifying use include seed planting, equipment operation, feeding livestock, or running farm buildings.
Step 3: Is the Item a Covered Agricultural Category?
Most states include these categories under exemption programs:
- Equipment & Machinery (tractors, irrigation units)
- Feed, Seed, Fertilizer, Pesticides
- Fuel & Utilities—especially dyed diesel and structured energy use
- Building Materials & Infrastructure—e.g., livestock shelters or greenhouses (check state-specific scope)
Ensure your item aligns with the state’s accepted categories.
Step 4: Does Your State Require an Application or Certificate?
If eligible, you must often register or submit documentation:
- North Carolina: North Carolina uses Form E‑595QF for qualifying farmers and E‑595CF for conditional farmers.
- Virginia: Farmers use Form ST-18, certifying that purchases are for agricultural production.
- Texas: Requires an ag/timber number and Form 01‑924 at purchase.
Step 5: Have You Retained Supporting Documentation?
Maintain records such as:
- Exemption certificates and application forms
- Invoices showing exempt purchases
- Statements of primary/exclusive use or usage logs
These documents are critical for audits and demonstrating compliance.
Decision Flow Overview
- Qualifying Farmer? → If yes, proceed.
- Exclusive/Primary Use? → If yes, proceed.
- Covered Category? → If yes, gather documentation.
- Certificate Required? → Apply/register and secure certificate.
- Document Everything! → Store records properly for proof.
How to Apply for Exemption & Maintain Compliance
Here’s a step-by-step guide to help farmers properly claim and retain their sales tax exemptions—keeping them compliant and saving dollars.
1. Register as a Farming Entity
First, confirm that you qualify as a farming business under your state’s criteria. In Connecticut, you must complete Form REG‑8 to apply for and receive the Form OR‑248, a Farmer Tax Exemption Permit, which lets you make tax-exempt purchases for farm use. This permit must be renewed annually, expiring on September 30 each year.
2. Submit State-Specific Forms
Different states require distinct applications to establish exemption eligibility:
- Connecticut: Use Form OR‑248 as your Farmer Tax Exemption Permit.
- Texas: Apply to obtain an Ag/Timber Number from the Comptroller’s office. This registration, once approved, exempts you from sales tax on qualifying agricultural purchases. It must be renewed every four years.
3. Present Your Certificate at Point of Sale
When making tax-exempt purchases, always provide the retailer with your valid certificate or exemption number at the time of purchase. Failure to present it may result in sales tax being collected and no refund permitted post-purchase.
4. Renew Permits As Needed
- Connecticut: Renew Form OR‑248 annually by September 30.
- Texas: Your Ag/Timber Number is valid for four years. You must renew before expiration to ensure uninterrupted exemption use.
5. Use Separate Accounting for Exempt vs. Non-Exempt Purchases
To prevent audit risks and ensure accurate reporting, always track exempt and taxable purchases separately:
- Keep invoices and purchase records clearly itemized
- Monitor quantities and usages to support “exclusive” or “primary” use claims
Quick Compliance Snapshot
| Step | Action |
| Register | Submit entity-specific exemption forms (e.g., OR-248, Ag/Timber). |
| Provide at POS | Give certificate or exemption number when buying eligible items. |
| Renew Promptly | Reapply annually (CT) or every four years (TX) before expiration. |
| Document Separately | Maintain itemized records of exempt vs taxable purchases. |
How HOST Helps Farmers and Agri Businesses Stay Compliant
For farmers, navigating sales tax exemptions isn’t always as simple as handing over a form at checkout. Every state has its own rules, renewal cycles, and documentation requirements—and mistakes can mean overpaying tax or facing penalties in an audit. That’s where HOST steps in, offering tailored compliance solutions not only for large agribusinesses but also for individual farmers managing their operations as businesses.
Services HOST Provides for Agriculture
- Exemption Certificate Management
HOST helps farmers obtain and maintain state-specific certificates like Connecticut’s OR-248 or Texas’s Ag/Timber Number, ensuring they’re always valid and ready to use at the point of sale.
- Registration & Nexus Analysis
If your farm sells across state lines—whether products, livestock, or value-added goods—HOST monitors nexus thresholds and registers you where required.
- Filing & Reporting
Even with exemptions, some farmers must file periodic returns, including “zero-tax” returns. HOST ensures those filings are accurate and on time.
- Audit Defense & Documentation
HOST organizes invoices, certificates, and records to provide a clean paper trail—crucial if state authorities ever question your exemptions. It also actively defends you during audits.
- Customized Tax Matrices
We map out what’s taxable versus exempt across multiple states, so you know exactly which purchases qualify.
With HOST as your compliance partner, you don’t have to worry about missing renewal dates, filing deadlines, or documentation gaps. Farmers can focus on production, confident that every exemption they’re entitled to is properly claimed and protected.
Conclusion: Clarity, Compliance, and Savings for Farmers
Sales tax exemptions for farmers are powerful tools, but they’re also complicated, varying widely by state and hinging on strict usage rules and documentation. Missteps—whether failing to renew a permit or misclassifying a purchase—can cost farmers thousands. By understanding which exemptions apply, keeping records clean, and staying proactive about compliance, agricultural businesses can protect their margins and put more dollars back into production. With HOST as a partner, farmers gain a one-stop solution for managing registrations, certificates, filings, and audits—ensuring every exemption is captured and compliance is never in doubt.
Frequently Asked Questions
1. Are farmers automatically exempt from sales tax?
No. Farmers must typically apply for and present an exemption certificate (e.g., Connecticut’s OR-248, Texas’s Ag/Timber Number) to qualify. Without it, sellers are required to charge sales tax.
2. What types of farm purchases are usually exempt?
Common exemptions include machinery, equipment, feed, seed, fertilizer, livestock, fuel, and sometimes building materials or solar infrastructure—provided they are used primarily or exclusively in production agriculture.
3. Do exemption certificates expire?
Yes. Many states require renewal—annually in Connecticut, every four years in Texas, and on varying cycles elsewhere. Farmers must track expiration dates to avoid losing their exemption.
4. Can mixed-use items still qualify for exemption?
Only if the farm use meets the state’s threshold, often 50% or more of total use. For example, a tractor used half for farming and half for personal property maintenance may not qualify in some states.
5. What if I mistakenly paid sales tax on exempt farm items?
You can request a refund from the seller or file an amended return/refund request with your state’s tax authority. Supporting invoices and documentation are required to process the claim.
