4 State of Vermont Tax Issues for Farmers

All Vermont taxpayers must follow both federal and state rules when filing income taxes.  Vermont taxpayers may be audited by either federal (IRS) or state (VT Dept of Taxes) auditors. Following are some issues that emerged in early 2013.

  1.  The Vermont Department of Tax may dis-allow federal Schedule F losses if it’s determined that the losses are not justified.  For instance, the state may determine that a farm is a ‘hobby,’ and recompute income tax.  In this case the person might have to pay state income taxes as if the farm broke even, and had not suffered financial losses.  Should a farmer suffer a loss in 3 of the past 5 years (and is audited) then it is the responsibility of the taxpayer to prove that they are farming as a business and the losses are justified.
  • On the federal side, The Farmer’s Tax Guide, IRS Publication 225, Chapter 4, Farm Business Expenses, has a section that discusses ‘Losses from Operating a Farm.’  http://www.irs.gov/pub/irs-pdf/p225.pdf In the copy for use in preparing 2012 return, this begins on page 26, right hand column.
  • On the Vermont side, this is the website for Business Taxes http://www.state.vt.us/tax/business.shtml

2. Sales Tax- Meals and Rooms Tax.  Food is exempted from state sales tax.  However, Vermont Meals and Rooms Tax must be charged on individual servings of food.  So, at a Farmer’s Market, no tax would be charged on a whole pie.  But one or more pieces of pie would be subject to the 9% Vermont Meals and Rooms Tax, depending on the situation.  http://www.state.vt.us/tax/majorvttaxesmealsandrooms.shtml

3.  Vermont Sales and Use Tax.  If buying something in another state, or online, a Vermont taxpayer owes sales tax at 6%, just as if it had been bought in Vermont.  VT Department of Taxes has audited NH businesses to determine if VT taxpayers bought items.  If no tax was paid, VT can audit the VT taxpayer.  The Vermont tax return has a line for paying this Use Tax.  Taxpayers can use the Use Tax Reporting Table to estimate this tax based on Adjusted Gross Income.  But for every purchase of $1,000 or more, the Use Tax must be calculated exactly.  Information here, on page 8:  http://www.state.vt.us/tax/pdf.word.excel/forms/income/2012/2012IncBk-web.pdf

4. Use Value Appraisal.  When a parcel of land that is in the Use Value Appraisal program changes ownership, the VT Department of Taxes must be notified within 30 days of the change.  This includes adding a name, or if it goes through an estate or a trust.  The owner could be liable for property taxes from the date the change occurred to the date that the state was notified.  This could really add up if it is several years.  http://www.state.vt.us/tax/pdf.word.excel/forms/pvr/lu-change-rev1-09-fillin.pdf

And this has not changed, but is quite often asked about.  Vermont Sales Tax Exemption Certificate for Agricultural Fertilizers, Pesticides, Machinery and Equipment.  http://www.state.vt.us/tax/pdf.word.excel/forms/business/s-3a.pdf    This exemption from sales tax is for farms, and does NOT include building materials or rental equipment.  The form includes a list of products.  The form is given to the seller of the goods, not with VT Department of Taxes.

The Vermont Department of Taxes website is pretty good, with all of the forms. www.state.vt.us/tax   In each individual situation, the ‘facts and circumstances’ of the situation determine the outcome.


About Dennis Kauppila

I work with farmers on finances. I started with UVM Extension in 1983, and have worked with hundreds of farmers on issues ranging from starting a farm, how to get a loan, leasing a farm, understanding farm finances, to retiring from farming. I teach 1 or 2 courses for farmers each winter. I am working with several farmers now on business plans, and I continue to work with many farmers on balance sheets and budgeting.
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2 Responses to 4 State of Vermont Tax Issues for Farmers

  1. Garland Mason says:

    Reblogged this on What's Growin' On and commented:
    Taxes! Not always the most popular subject but incredibly important nonetheless. Dennis makes some excellent points here that you might not otherwise know about, be sure to check out his post!

  2. Pingback: 4 State of Vermont Tax Issues for Farms | UVM Extension Farm Viability: the BLOG

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