New Agricultural Exemption Eases Transactions for Farmers

Friday, December 14, 2007 | 12:00 am


NASHVILLE, Tenn. - The Department of Revenue’s Taxpayer and Vehicle Services Division is in the process of educating and registering qualified farmers, nursery operators and timber harvesters regarding upcoming changes in Tennessee’s agricultural exemptions from sales and use tax. Effective Jan. 1, 2008, those purchasing qualified farm equipment, seed and other tax-exempt farm and nursery supplies must present proof of their status as an exempt farmer, nursery operator or timber harvester by providing a copy of their Agricultural Sales and Use Tax Certificate of Exemption directly to the seller.



“The new law allows for total, rather than partial, exemptions for specific qualifying purchases and keeps current exemptions in place,” said Revenue Commissioner Reagan Farr. “The new exemption will make transactions more convenient for farmers who can enjoy automatic tax-free purchases upon presentation of the certificate to retailers. Qualified purchasers that fail to receive an exemption certificate before Jan. 1, 2008 will have to pay tax on their qualified purchases and file refunds later with the retailer.”

Those who have not been determined automatically to qualify for the exemption are required to fill out an application and file it with the department to receive a certificate authorizing tax-exempt purchases. Those who believe they qualify (please see qualification requirements below) may view and print an application at Revenue’s Web site,

In order to qualify for the exemption, a person or business must meet at least one of the following criteria:

  • Own or lease land where $1,000 or more of agricultural products are produced or sold during a year
  • Provide for-hire agricultural services of plowing, planting, harvesting, growing, raising or processing agricultural products
  • Own land that qualifies for taxation under the Agricultural, Forest and Open Space Land Act of 1976
  • File Schedule F or farm rental activity Form 4835 or Schedule E on Federal tax returns
  • In the absence of the above criteria, establish to the commissioner that he or she is in business of producing agricultural commodities

Backyard gardeners and other purchasers not meeting one of these criteria will not qualify for the exemption. Please visit the department’s Web site at to view Important Notices and other information about qualification requirements and tax-exempt purchases.

“The new exemption certificate will ensure that qualified farmers, nursery operators and timber harvesters are easily able to take advantage of sales and use tax exemptions for eligible purchases,” Farr said.

Machinery or appliances used directly for producing agricultural and nursery products are no longer required to cost more than $250 to be exempt.  The previous 1.5 percent sales tax rate has been repealed and a total exemption is available to qualified persons for electricity, natural gas and liquefied gas, as well as coal, wood, wood products or fuel oil used as energy fuel for to produce food or to grow horticultural products. Repair and replacement parts and labor continue to be exempt on all qualified farm machinery and equipment. Dyed diesel fuel used for agricultural purposes continues to be exempt from sales and use tax and will be exempt for timber harvesting as of Jan. 1. Additionally, all-terrain vehicles (ATVs) used directly in the production of agricultural or nursery products will be tax-exempt, with qualified purchasers no longer required to pay the tax up front and file later for a refund.

Items that are exempt from sales and use tax when sold to persons who have received an Agricultural Sales and Use Tax Certificate of Exemption (per Public Chapter 602, Section 79) include:

  • Any appliance used directly and principally for producing agricultural products
  • Grain bins and attachments
  • Aircraft designed for crop dusting
  • Equipment used for harvesting timber
  • Livestock trailers
  • Self-propelled fertilizer or chemical application equipment
  • Systems for environment control, feeding, watering and egg conveyance for poultry
  • Replacement parts and labor for previously qualifying equipment
  • Gas or diesel fuel used for agricultural purposes (does not include pre-mixed gas and oil of one gallon or less)
  • Seed, seedlings, plants, fertilizer and pesticides used to produce food or fiber, including tobacco, for human or animal consumption
  • Farm containers and plastic or canvas covers used in raising plants, including tobacco, for human or animal consumption
  • Feeds and drugs for livestock
  • Agri-sawdust
  • Electricity, gas, propane, coal, wood and fuel oil used in the production of food or fiber for human or animal consumption or in the production of nursery and greenhouse crops

Purchasers must provide a copy of the Agricultural Sales and Use Tax Certificate of Exemption issued by the Department of Revenue, a copy of a wallet-sized exemption card also provided by Revenue or a fully completed Streamlined Sales and Use Tax Certificate of Exemption when making purchases after Jan. 1, 2008. Sellers must keep copies of one of these documents on file and include the buyer’s name, address and description of tax-exempt purchases on each invoice. Farmer’s affidavits will no longer be valid after Jan. 1, 2008.

The department mailed Agricultural Sales and Use Tax Certificates of Exemption to those who were determined automatically to qualify for the exemption. Those who have already received a certificate do not need to fill out an application or file additional documentation with the department. Receipt of a certificate serves as the notice of sales tax exempt status. Those who have received an exemption in error should indicate so on the certificate and mail it back to the department.