Tennessee Farmers and Foresters Benefit From New Legislation

In partnership with: Tennessee Department of Agriculture

With more than 77,000 farms covering 41% of the land in Tennessee, agriculture is the state’s No. 1 industry. Including forestry, Tennessee agriculture has an impact of more than $80 billion on the state’s economy.

As one of only nine states in the country without a state income tax, Tennessee’s state budget is driven by sales tax. Until now, farmers in Tennessee have paid up to 9.75% sales tax in some jurisdictions on certain farming expenses, driving up their cost of doing business. To help alleviate some of that burden, the Tennessee General Assembly recently passed the Modernization of Agriculture Sales Tax Bill to help growers pay for necessary farming and nursery operations expenses untaxed.

Effective Jan. 1, 2023, qualified producers are eligible for sales tax exemption for all items used primarily in agricultural operations.

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“The Tennessee General Assembly deserves a lot of credit for this bill,” says Kevin Hensley, public policy director for the Tennessee Farm Bureau Federation. “By passing this exemption, we’re setting up the economic climate so a farmer can continue to be profitable and have a competitive advantage. If something is going into a farm or nursery’s production, then the belief is that it should be tax exempt.”

To purchase farm equipment and machinery exempt from sales tax, farmers must show their Tennessee sales tax exemption card. To get a card for you or your farm, complete and turn in the Agricultural Sales and Use Tax Exemption application to the Tennessee Department of Revenue. Items that will no longer be taxed under the new Agriculture Tax Exemption Bill include building and fencing materials, warranties and personal property used more than 50% in agriculture operations. Contractors and subcontractors who use such items in performing a contract with a qualified farmer, however, are subject to sales tax on such property and may not use the qualified farmer’s tax-exempt status to purchase property tax-exempt. Automobiles, trucks, household appliances, and gasoline or diesel fuel used in vehicles driven on public highways remain subject to sales tax.

“The people of Tennessee want to live close to green space, and by helping our farms remain profitable, it’s an inherent good for the state, for farmers and for the citizens of Tennessee.”

– Kevin Hensley, public policy director for the Tennessee Farm Bureau Federation

Under Tennessee law, livestock is required to be in secure fence surroundings, but until now, the fence building materials and construction have not been consistently tax-exempt. By modernizing the sales tax exemption, many of these previous contradictions are being resolved to allow producers to make purchases at a more reasonable rate for their farm and nursery operations.

“There’s a natural beauty to land in Tennessee, with more than 50% of our land covered in forest and 41% covered in farmland,” Hensley says. “The people of Tennessee want to live close to green space, and by helping our farms remain profitable, it’s an inherent good for the state, for farmers and for the citizens of Tennessee.”

For more information, visit the Department of Revenue’s website at tn.gov/revenue.html.