Understanding Agricultural Taxes
When starting a farm business, it can be overwhelming to understand where to start with taxes. Cornell Small Farms has numerous guides to outline how and when to pay income tax, collect sales tax, and become sales tax exempt.
When you sell livestock, produce, grains, or other products, the entire amount you receive and the costs associated with its purchase and production should be reported on a Schedule F income tax form. You can learn more about paying income tax on agricultural income on our Income Tax fact sheet.
Farmers do not need to collect sales tax on farm and food products intended for human consumption; this includes: all fresh and processed foods: fruits, vegetables, baked goods, jellies, jams, preserves, meats, eggs, dairy products, syrup, honey, cider, etc.
However products such as prepared foods, cut flowers, and ornamental crops are required to collect tax when sold directly to consumers. See the complete list and learn how to become a sales tax vendor on the Collecting Sales Tax fact sheet.
Farm operations are exempt from paying sales tax on items used in the farming operation. None of the exemptions are automatic. You must either present an exemption certificate to the vendor when purchasing products or you can claim a refund if you have evidence to show you paid the sales tax. Read more about being tax exempt and access the exemption certificate on our Sales Tax Exemptions and Refunds fact sheet.
As a farmer it is important to understand your rights and responsibilities when it comes to navigating state and federal taxes.