STERLING, Va. — I bought a new hay wagon to carry children on an educational voyage around my farm. Does it qualify for a tax break?
I’m going to sink a lot of money into biofuels for alternative energy sources. Does the Commonwealth of Virginia want to encourage me to do that?
I’m going to put in five miles of fencing to keep my livestock out of the creek — and thus help meet Chesapeake Bay goals. Do I get a tax break on my new fence hole digger?
No, no and no.
Those were just some of the questions from farmers, agribusiness people and agriculture professionals at a town hall meeting on taxation, held Oct. 22 at the Loudoun Heritage Farm Museum.
The independent nonprofit Virginia Agribusiness Council (with the motto, “We represent Virginia agribusiness with a unified voice”) sponsored the session, one of six around the state this year to focus on either taxation or transportation as they relate to agriculture and its related businesses.
The panel, headed by Virginia Secretary of Agriculture and Forestry Todd Haymore, also dispensed some guidance on the new rules for electronic filing.
Agricultural tax exemptions were included when Virginia first adopted a sales tax in the 1980s, said Mark Haskins, director of policy development at the Virginia Department of Taxation. Those exemptions on taxes on purchases for agricultural production were put in, Haskins said, “to foster Virginia’s basic industries.”
And agriculture and forestry are about as basic as you can get, said Katie Frazer, president of the Virginia Agribusiness Council.
“They are Virginia’s No. 1 industry, contributing $79 billion to our economy annually.”
So why, asked cattle farmer Gary Hornbaker, can’t I get the tax exemption for that new post hole digger? The state wants me to fence off my streams.
Not so fast, answered Haskins. Once you install that fence, it’s permanently attached to your land and it becomes real property, an asset considered in your assessment. No tax exemption.
Hornbaker, who is also a staff member on the county’s rural economic development team and a former Extension agent, countered that an assessor in some other county in southwest Virginia might see it that way, but in northern Virginia, “our land is assessed on how many houses could be built on it. That fence has no effect on value in the tax assessor’s eyes.
“Give us the credit we deserve. The fence is for agricultural production.”
To muddy the waters further, the clerk at the local store has to make the decision whether a tax exemption can be granted.
Jeff Browning, owner of Browning Equipment in Purcellville, said, “It’s a challenge, the fencing issues. We have to charge sales tax on a post hole digger, and the farmer says, I shouldn’t have to pay tax on that.’ I have to explain, you’re improving your property, so it’s taxed.”
But if the buyer says he’s going to use the digger to put up trellises for his new vineyard, voila! It’s tax exempt.
“I have to interpret that and accept the statement of the purchaser,” Browning said.
Tyler Wegmeyer, owner of the growing and successful pick-your-own (strawberries, brambles and pumpkins) Wegmeyer Farms in Lincoln, stresses educational activities, including the hayrides around the farm.
But unless you are going to haul hay in that wagon, Haskins cautioned, don’t expect a tax exemption for it.
And right now, the state of Virginia does not offer tax incentives for biofuels. The federal government might, he said.
The state does offer incentives to agricultural producers for putting in place a certified (by the Soil and Water Conservation District) plan for nutrient and pesticide management; for implementing best management practices for production for market or for reducing nonpoint source pollutants from equines; for protecting riparian forest buffers; for installing or improving wineries and vineyards; and for putting land under a conservation easement.
Specified agricultural items and equipment — like the post hole digger and no-till seeders — qualify for tax exemptions, as do occasional sales and certain farmers market sales.
Then there are horses.
Loudoun County, host of the town hall meeting, is home to more horses than any other county in the state. An audience member asked why she would be taxed (5 percent on a value of $100,000) when she brought her young stallion over from West Virginia for one day for a show. The horse was bred and raised by her, so he was never subjected to a sales tax. He’ll be used as a stallion later in his life, but now he’s establishing his reputation.
Show horses and race horses are taxed in Virginia. Horses for breeding are not.
“The horse coming in to show is not exempt from use tax,” Haskins said. “He’s never been taxed anywhere and there is a use tax based on his fair market value.”
A 1989 Virginia attorney general’s opinion ruled that a group of yearling Thoroughbred horses that were purchased in Kentucky (no sales tax), brought to the owner’s farm in Virginia for up to a year for growth and training, and then moved to different race tracks around the country, are liable for use tax, even though some of them might, at the end of their racing careers, be used for breeding. Only horses used exclusively for breeding are exempt.
Haskins ended the discussion with a promise to take unanswered questions back with him to Richmond and to work with Haymore’s office to find the answers and offer solutions. He pointed out that the legislature makes the rules, and any changes in existing law will have to come from the General Assembly.
For help sorting through tax questions, call Virginia’s taxpayer assistance line, 804-367-8037. To reach the Virginia Agribusiness Council, call 804-643-3555.