Tax exemption

Nebraska Sales and Use Tax Exemption for Agricultural Repair and Replacement Parts

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As the crop season gets underway, now is a good time to remind everyone of that the Nebraska, effective October 1, 2014, exempts sales and use tax when purchasing agricultural repair and/or replacement parts.

Per the Nebraska Department of Revenue’s Sales Tax Exemption Chart, (and based upon this Department of Revenue regulation) any repair or replacement parts for agricultural machinery and equipment used in commercial agriculture is exempt from sales and use tax.  Form 13 is required when using the exemption; specifically, you must fill out Section B of Form 13 and indicate that the exemption is for commercial agriculture.

The exemption for repair and replacement parts is separate from the Nebraska Personal Property Tax Exemption for beginning farmers.  The Personal Property Tax Exemption requires an application to the Nebraska Department of Agriculture, as well as supporting documentation.  The exemption for repair and replacement parts does not require such steps.

If you have any questions, please feel free to contact us!  We’re always here to help.

Nebraska Personal Property Tax Exemption for Beginning Farmers Due November 1

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Nebraska’s beginning farmers and ranchers have a tax program available to them, the Personal Property Tax Exemption.  Applications are due by November 1, 2014 for the 2015 tax year.  The Personal Property Tax Exemption is for beginning farmers, defined as those farming for ten years or less out of the past fifteen.  What the tax exemption provides is:

  • A three year tax exemption on tangible personal property up to $100,000 per year; for
  • Tangible personal property is agricultural or horticultural machinery and equipment.

How do you apply?  The application can be found at the Nebraska Department of Agriculture’s website.  (Note the application is the same as the Beginning Farmer Tax Credit — just check the box for the personal property exemption in the upper-right hand corner.)  You must apply by November 1 of the year preceding the year in which the exemption is to begin.  This means for an exemption starting in 2014, you must apply by November 1, 2013.

Does this mean the Beginning Farmer Tax Credit and Personal Property Exemption must be applied for at the same time?  No!  Does it also mean you must be a beginning farmer throughout the three year exemption?  No — you must only be a beginning farmer in the first year of the exemption.  However, the exemption is a one-time only proposition — you cannot keep applying for it.

This means that you can plan ahead for the optional time to apply for the tax exemption.  If your operation’s business plan is to purchase equipment in years five through seven (and you remain a beginning farmer at year five), you would want to apply for the tax exemption at that time, rather than applying for it immediately.

If you have any questions or require any assistance in applying for the personal property tax exemption, feel free to contact Legal Aid of Nebraska at 855-660-1391 or online here.

Timing the Nebraska Personal Property Tax Exemption

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We previously discussed the math of the Nebraska Beginning Farmer Tax Credit.  Nebraska also offers a personal property tax exemption to beginning farmers for the purchase of personal property, such as machinery, used in the production of agriculture or horticulture.  Unlike the Beginning Farmer Tax Credit, the Personal Property Tax Exemption is provided to the beginning farmer, not the owner of agricultural assets (i.e. the person a beginning farmer leases from).

We have discussed the requirements for eligibility of the personal property exemption previously, but nonetheless, the requirements for the beginning farmer are the same as for the Beginning Farmer Tax Credit, with one exception: the personal property tax exemption does not require the beginning farmer to rent from someone to be eligible.

Why is timing important for the personal property tax exemption?  It is because the personal property tax exemption allows for a personal property tax exemption up to $100,000 a year for three years.  Once a beginning farmer is uses in the program, the beginning farmer may not use it again.  Thus, the beginning farmer should time when they apply for the tax exemption so as to maximize its potential.

Lets say that you are a beginning farmer.  Your business plan is to grow your business slowly but steadily.  Your business plan calls for you to steadily purchase equipment and machinery throughout your ten years as a beginning farmer.  You may begin with a drill or small tractor.  You plan to expand to a larger tractor and perhaps haying equipment.  Or, your operation may require specialized equipment.

Knowing this, it is best to plan when to apply for the personal property tax exemption at a time in your operation when you plan to outlay the most money on personal property purchases.  That way, the beginning farmer can use the personal property tax exemption to the maximum effect, helping the cash flow of the operation.

Keep in mind that the application for the personal property tax exemption is due by November 1st of the year prior to the year the exemption is sought.  For example, to apply for the exemption for 2014 through 2016, a beginning farmer must apply to the Beginning Farmer Board by November 1, 2013.  Then, to claim the exemption, the beginning farmer must present the eligibility certificate issued by the Beginning Farmer Board to proper county assessor by December 31 for approval.

Have questions?  Or just want to talk about the math?  Feel free to contact us!

Nebraska Personal Property Tax Exemption for Beginning Farmers

/ nelegalaidfarm / 2 Comments

Nebraska’s beginning farmers and ranchers have a tax program available to them, the Personal Property Tax Exemption.  The Personal Property Tax Exemption is for beginning farmers, defined as those farming for ten years or less out of the past fifteen.  What the tax exemption provides is:

  • A three year tax exemption on tangible personal property up to $100,000 per year; for
  • Tangible personal property is agricultural or horticultural machinery and equipment.

How do you apply?  The application can be found at the Nebraska Department of Agriculture’s website.  (Note the application is the same as the Beginning Farmer Tax Credit — just check the box for the personal property exemption in the upper-right hand corner.)  You must apply by November 1 of the year preceding the year in which the exemption is to begin.  This means for an exemption starting in 2014, you must apply by November 1, 2013.

Does this mean the Beginning Farmer Tax Credit and Personal Property Exemption must be applied for at the same time?  No!  Does it also mean you must be a beginning farmer throughout the three year exemption?  No — you must only be a beginning farmer in the first year of the exemption.  However, the exemption is a one-time only proposition — you cannot keep applying for it.

This means that you can plan ahead for the optional time to apply for the tax exemption.  If your operation’s business plan is to purchase equipment in years five through seven (and you remain a beginning farmer at year five), you would want to apply for the tax exemption at that time, rather than applying for it immediately.

If you have any questions or require any assistance in applying for the personal property tax exemption, feel free to contact Legal Aid of Nebraska at 855-660-1391 or online here.