To get a farm tax exempt number, apply through your state’s department of revenue or equivalent tax agency and show that you run a commercial agricultural operation. Most states will ask for your federal tax ID, basic details about your farm, and a copy of your Schedule F from your last federal return. There is no federal farm tax exemption number; this is a state program, and the exact form, fee, and processing time depend on where you farm.
Where to Apply
Start at your state’s department of revenue website and search for “agricultural exemption” or “farm tax exemption.” You’ll find the application form, the eligibility rules, and instructions specific to your state. Some states accept applications entirely online. Others still require paper forms submitted by mail or in person.
One quirk to know before you start: not every state issues an actual “number.” Some assign you an exemption number tied to your farm. Others skip the number and instead have you complete an exemption certificate for each vendor, which the seller keeps on file. A few use a hybrid, where you receive a number that you then write onto certificates at the point of sale. The application process is similar in all three systems; only the credential you receive at the end differs.
If you farm in Alaska, Delaware, Montana, New Hampshire, or Oregon, there is nothing to apply for. Those states have no sales tax.
What You’ll Need to Submit
The specifics vary, but nearly every state application asks for the same core pieces of information.
- Business identification: your Federal Employer Identification Number (EIN) or Social Security Number, along with your business’s legal name.
- Farm details: the physical address of the farm, the type of operation, what you produce, and your estimated annual farm revenue.
- Proof of farming activity: a copy of your federal Schedule F (Profit or Loss from Farming), filed with your Form 1040, is the document most states ask for.1Internal Revenue Service. About Schedule F (Form 1040), Profit or Loss From Farming
If you rent your farmland out rather than working it yourself, some states accept IRS Form 4835 (Farm Rental Income and Expenses) in place of Schedule F. A handful of states also ask first-time applicants for a business plan, proof of land ownership or a lease, or photos of the operation.
Processing times run from a few weeks in states with online systems to a couple of months where applications are reviewed by hand. Once you’re approved, your number, certificate, or permit arrives by mail or email.
Whether You Actually Qualify
The threshold question every state asks is whether you’re farming as a business or as a hobby. States want to see agricultural products produced for sale and a genuine attempt to turn a profit. A backyard garden or a few chickens kept for household eggs will not qualify.
Many state agencies borrow the IRS benchmark for a for-profit activity: net profit in at least three of the last five tax years. Horse breeding, training, showing, and racing get a looser test of two profitable years out of seven.2Office of the Law Revision Counsel. 26 USC 183 – Activities Not Engaged in for Profit Missing that mark doesn’t automatically disqualify you, but it invites a harder look at your application.
States also set their own income or acreage floors, and these vary widely. Some require a minimum annual gross from farm sales. Others look at what share of your total income comes from agriculture. The dollar figures range from no specific minimum to several thousand dollars in farm revenue.
Qualifying activities generally include crop production, livestock, dairy, poultry, aquaculture, beekeeping, and nursery operations. Timber harvesting is excluded from the farm definition in some states, so if forestry is part of what you do, check your state’s rules before assuming it counts.
Using the Number Once You Have It
If your state issued you a number, you give it to the vendor when you make a qualifying purchase. In most states you’ll also complete an exemption certificate that the seller keeps on file. The certificate documents why no sales tax was collected and protects the vendor in an audit.
A properly completed certificate includes the seller’s name and address, your name and address, a description of what you’re buying, a statement that the purchase is for agricultural production, and your signature. The seller keeps the original. Keep a copy for yourself.
Present the exemption at the register. If you forget and pay sales tax anyway, you can usually file a refund claim with your state tax agency, though the paperwork rarely justifies the effort on a bag of feed. On a piece of equipment, it’s worth doing.
Buying From Another State
Twenty-four states participate in the Streamlined Sales and Use Tax Agreement, which offers a standardized exemption certificate accepted across all member states.3Streamlined Sales Tax Governing Board. Streamlined Sales Tax The form has a field for agricultural production exemptions.4Streamlined Sales Tax Governing Board. Streamlined Sales and Use Tax Agreement Certificate of Exemption Not every exemption on the standardized form is valid in every member state, so confirm that the state where you’re buying actually allows agricultural exemptions. For purchases in a non-member state, you’ll use that state’s own certificate. Certificates go to the vendor, not to any state agency or to the Streamlined Sales Tax Governing Board.5Streamlined Sales Tax Governing Board. Exemptions
Keeping the Exemption Active
Most states require you to renew periodically. Cycles run from one to four years. Some states send renewal packets before the certificate expires; others expect you to track the date yourself. If the exemption lapses, you’ll pay sales tax on purchases until you renew, so put the expiration on your calendar the day the certificate arrives.
Report changes to your operation promptly. A move, an ownership change, adding a partner, or shifting from crops to livestock can all affect your status.
Hold on to copies of every certificate you give a vendor along with receipts for tax-exempt purchases. State rules generally require you to keep these records for three to seven years. A simple system organized by year and vendor is enough.
If Your Application Is Denied
A denial usually means the state decided your operation didn’t meet its eligibility criteria. Farm income may have fallen below the threshold, or the documentation may not have shown a commercial farming operation clearly enough. Most states let you appeal or reapply once you can fix the shortfall. Filing a complete Schedule F that shows farm income and expenses is often the single most effective way to strengthen a weak application.1Internal Revenue Service. About Schedule F (Form 1040), Profit or Loss From Farming
If your operation is genuinely new and you don’t yet have a return showing farm income, ask what alternative documentation your state accepts. Some agencies will issue a provisional exemption to a startup farm based on a business plan plus proof of investment in land, equipment, or livestock.