AGRICULTURAL SALES TAX EXEMPTIONS Priority:
Oppose any reduction in agricultural sales tax exemptions Support a sales tax exemption for wrapping and binding materials used on agricultural products (e.g. module wrap, baler twine, bale wrap, etc.) Support an effort to gain a sales tax exemption on parts and repairs on farm equipment
Bill # Background: Sales tax exemptions on agricultural input items are an important element in keeping agriculture viable in this state. All states grant such exemptions, so these must be maintained to keep Arkansas farmers competitive and to avoid farmers purchasing these items from out-of-state vendors. Such exemptions also keep agriculture on par with other sectors of the economy (namely manufacturing) who have exemptions on their input items. The importance of these exemptions and their role in maintaining a healthy, vibrant agricultural industry in Arkansas cannot be stressed enough. Removal of the existing exemptions would do harm to the state’s agricultural sector which represents 20 percent of Arkansas’ GDP. While the total value of exemptions exceeds $300 million annually, the value of exemptions can be computed on a per farm basis. We would also note that some of these exemptions are used by the retail consumer and agriculture product processors rather than the farmer. While not all these exemptions end up directly in the farmers’ pocket, they are very important to the farmers and ranchers of our state and essential to preserving profitability and sustaining in this industry. Talking Points: Certain agricultural input items are currently not exempt from sales tax. Various forms of bagging, wrapping and binding materials are not exempt in Arkansas; whereas they are in neighboring states. Legislation would update code to match 21st century technology expanding the antiquated code beyond cotton binding and tomato twine. Adopting this legislation will stop trade leakage into Oklahoma, Missouri and Texas where hay twine and wrap are exempted. Mississippi, Texas and Missouri law provides an exemption for cotton wrap and binding. Exemptions in neighboring states give their farmers a competitive advantage. For example, cotton bagging materials used to package a bale of cotton is exempt, but the wrapping material now used to package cotton modules are not. Also, binding materials used in the tomato industry are exempt, but baler twine used for hay is not. Stated another way, in Arkansas the value of agricultural exemptions is equal to $5,500 per farm on average. Farm Bureau Policy: Taxes 153 We vigorously oppose any attempt to remove sales tax exemptions on agricultural production input items and support inclusion of other agricultural input items not currently exempt.