Michigan sales tax and farm exemption
Most common agricultural input expenses are exempt from Michigan Sales Tax.
Michigan State University Extension will often get phone calls from farmers wondering how they can get a tax exempt number so they do not have to pay sales tax on items used for their farm. To clarify, there is no such thing as a “sales tax exemption number” for agriculture. Be cautious, farmers should not use their social security number as proof for a sales tax exempt purchase. It is important to note that the farm or entity is in “the production of qualified agricultural or horticultural pursuits as a business enterprise”.
However there are some items that are not exempt for agriculture, such as building supplies for affixed real estate structures. Drainage tile and portable grain bins do qualify for sales tax exemption, as does grain drying equipment and natural or propane gas used to fuel that equipment for agricultural purposes. The amendment for portable grain bins, land tiles, and subsurface irrigation pipe can be found at the Michigan Department of Treasury website..
The certificate that qualifying agricultural producers, organizations and other exempt entities may use, is the Michigan Sales and Use Tax Certificate of Exemption or form 3372.
Producers will note on item 4, in section 3, that you are to indicate the percentage of the purchase item is for agricultural production and that percentage would be exempt from sales tax. Producers are encouraged to complete this form and give to vendors when making exempt purchases.
Most farm retail businesses simply have a location on the purchase paperwork for qualifying items, requesting the producer’s signature. Vendors or sellers are required to retain the exemption certificates for a period of at least four years. It is optional for businesses to accept or reject any or all exempt purchases.
Note in section 4 of form 3372, where the producer fills in contact information and signs the form, declaring “that the information on this certificate is true…” Businesses may be audited by the Michigan Department of Treasury; however, the signature on the form is the person or business that will ultimately be required to show proof and be in compliance, not the vendors or seller. More information can be found at the Michigan Department of Treasury website.
The exemption is limited to the consumption of tangible personal property used in tilling, planting, caring for or harvesting things of the soil, in the breeding, raising or caring of livestock poultry or horticultural products for further growth. The exemption does not include tangible personal property affixed to and becoming a structural part of real estate.