Farmers in Ohio have been enjoying the tax saving benefits that the state provides to them to farm. The two that come to mind is the CAUV program and the sales tax exemption. We will look at both of these in closer detail.
CAUV or current agriculture use value is a program started in the mid-1970's and offered to farmers where they can greatly reduce their property tax bill. Normally in Ohio, property tax is calculated based on 35% of fair market value. CAUV calculates the property's land using an agricultural value based on soil type instead of fair market value. Agriculture land values are typically much lower than fair market values and can be a great savings to the farmer enrolled in the program.
An example of this would be that if say the fair market value for the land is $8,000 an acre but the agriculture value which is based on a formula of an average of how much the land can produce may only be $3,000, so the property tax bill will be much lower.
As I have found out, this program is open to all farmer no matter how much land they own. Typically farmers who own 10 acres and a one acre home site can enroll automatically in the program, provided that they farm the land. However, if you are a farmer who owns less than 10 acres, you will still qualify provided that you are capable of producing $2,500 in gross sales.
The process is easy to do in Ohio and only requires filling out an application to enroll the farm. If you own less than 10 acres, you will have to show that the last three year's gross sales were at least $2,500. After the application is filed and a one time $25.00 fee is paid, a county auditor assistant will come out and check out the property for approval.
After being approved, the farmer must fill out a renewal form every year but no fee is required to do so.
The only catch to this program is if the property is discontinued from farming and this program, a penalty of 3 years worth of tax savings must be paid back to the county.
The second savings is the sales tax exemption. Farmers are allowed by law to exempt sales tax from materials which are used in the production of a farm product. This includes purchases of farm machinery such as tractors and implements, bedding, seed, fertilizers, sprays, building materials and feed to name a few. A larger detailed list can be found at the county and state Extension office.
For most local farm stores in our state, it is quite easy, all is needed is a completely filled out Unit or Blanket Sales Tax exemption form but more recently stores I found out, especially big box stores such as Tractor Supply and Home Depot, are requiring that you get an EIN or Employer Identification Number which is available from the IRS website to apply for this status at their stores.
Either way, it is something that farmers should be looking into doing since they are normally require to buy large quantities of products to do business and hence the sales tax on that materials are also high especially when your state has a 6-8% sales tax rate.