Rep. Baker urging farmers to apply for new ag tax exemption number

Janie Slaven, Commonwealth Journal, Somerset, Ky.
·4 min read

Jun. 10—State Representative Shane Baker (R-Somerset) of the 85th House District is trying to get the word out about recent changes to Kentucky's agricultural tax exemption law, especially with some farmers encountering trouble with the new application process.

Rep. Baker explained that before he took office, the 2020 General Assembly passed Senate Bill 148 — requiring farmers who are eligible for agriculture exemptions from the 6% sales and use tax on qualifying purchases to apply for an Agriculture Exemption (AE) Number from the Kentucky Department of Revenue (DOR).

The deadline for farmers to have their AE Number in place was initially supposed to be this July 1. However due to a large backlog of applications which the Department of Revenue has yet to process, state lawmakers in the 2022 General Assembly passed SB 121 — extending the deadline to January 1, 2023.

"We have six months now but with the backlog of thousands...my concern is that this is going to hit some people in the face and cost them extra money that they shouldn't necessarily have to pay," Rep. Baker said. "A lot of the full-time farmers, those who have bigger operations, they're aware and have done what they need to do, but a lot of others haven't."

Though Baker knew of the ag exemption because of the latest bill passed, it wasn't until he was recently contacted by a local farmer who had applied for his AE Number back in February and still hadn't received one that the representative began to investigate the issue and found out about the backlog as well as general lack of awareness.

"A lot of farmers seem to not know about this," Rep. Baker said, adding that one local farm equipment store estimated "maybe 20 percent of his customers have already done the process."

Several articles about the changes are available through the University of Kentucky Cooperative Extension Service website (https://anr.ca.uky.edu/). Below is a synopsis of that information.

The AE application is known as Form 51A800, which is available from the Department of Revenue at www.revenue.ky.gov under Sales Tax forms.

This form requires typical information such as name, mailing address, farm address, email address and driver's license number or Federal Employer Identification Number (FEIN). But it also requires verification that the applicant is involved in production farming (as opposed to hobby gardening, for example). The applicant must provide at least one of the following:

—IRS Schedule F, Profit or Loss from Farming (preferred for quickest processing);

—IRS Form 4835, Farm Rental Income and Expenses;

—Other type of documentation that may verify/document sales of ag products such as receipts, invoices, etc.; and

—A written statement of agriculture activity (only if you are unable to provide any of the other above options).

The actual statutory provisions dictating eligible exemptions haven't changed but according to state officials, there was previously little to no way of ensuring the exemption was being used for genuine agriculture purposes.

Once received, the farmer may then provide their AE number to farm retailers or use the number on these new forms as outlined under KRS (Kentucky Revised Statutes) 139.480:

—Farm Exemption Certificate (Form 51A158) for general ag supplies such as feed, seed, fencing, fertilizer, etc.

—On-Farm Facilities Certificate of Exemption for Materials, Machinery and Equipment (Form 51A159) for items to be used in construction, repair or renovation of farm facilities.

Retailers should be able to verify an AE number through a DOR database. They may still accept a fully completed Kentucky Farm Exemption Certificate or Streamlined Sales Tax Certificate of Exemption (Form 51A260) with a driver's license number if the buyer hasn't yet received their AE number.

Rep. Baker said he's trying to get the information to farmers "so they don't find themselves in a bad situation at the first of the year."

The AE numbers would expire on December 31, 2026, according to current law, then every four years for renewals.

Completed applications should be submitted by email to DOR.Webresponsesalestax@ky.gov or mailed to Kentucky Department of Revenue, Division of Sales and Use Tax, Station 66, P.O. Box 181, Frankfort, KY 40602-0181.

Those with questions should contact the DOR Division of Sales and Use Tax at (502) 564-5170 (select Option 1) or DOR.Webresponsesalestax@ky.gov.