Navigating tax law can be challenging, even for experts. However, tax benefits help Alabama farmers increase efficiency, grow their operations and strengthen local economies.
The Alabama Farmers Federation prioritized two new benefits in the 2022 Legislative Session. The Alabama Department of Revenue will release administrative rules later this year.
The first is an exemption related to grain storage facilities. Historically, assessing grain bins across the state varied. Now, grain bins cannot be assessed as part of a property’s value when calculating property taxes. If a property owner believes their county may have incorrectly assessed their property value, they can submit a “Petition for Review Form” at revenue.alabama.gov/assessments.
Another new law clarifies the exemption for producer value-added products. If a producer adds value to an agricultural product they produced, they are not required to charge sales tax on that product. The law also allows the farmer’s immediate family members and employees to make sales, as long as those employees assisted in producing the original product. This applies to items including Alabama-grown and -made jams and jellies.
This benefit operates in conjunction with two current exemptions. These exemptions, found in Alabama Code 40-23-4(a)(5) and 40-23-62(8), allow producers to sell products they grow, raise and produce without charging sales tax. This includes plants, eggs, honey and livestock.
Alabama law also exempts a variety of agricultural inputs from sales tax, including feed, seed and fertilizer when used for an agricultural purpose. Alabama Code 40-23-4 lists items for the exemption.
Farm machinery, which includes machines and equipment used in planting, cultivating and harvesting farm products, is taxed at a reduced rate when compared to other machinery and equipment. In Alabama, these items are taxed at 1.5% of gross sale proceeds. This also applies to machines and equipment used in connection with producing livestock and poultry.
No discussion of Alabama taxes would be complete without mentioning current use, which helps Alabama farm families afford to remain on their farms. Increasing land values, especially around urban areas, would make property taxes cripplingly high for farmers. Current use assesses property at its current use value, rather than its speculative market value. Farmers can check the status of their property with their county revenue office.
While items discussed here are a great starting point for discussion, farmers should contact a licensed attorney or accountant for specific tax advice.