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Understanding Taxes & Regulations

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What do I need to do to become a real farm?
In most instances, getting “official” recognition for your farm is as easy as filing a DBA (“Doing Business As”) form with your County Clerk’s office. The transaction usually costs around $25, and it serves to protect your farm name within your county. Then you can take this DBA to your bank and use it to open a business account for your farm. Use this account to keep all farm income and expenses separate from your home bank accounts. It’s the very beginning of good farm business practices and recordkeeping.Once you’ve done this, you can qualify to be exempt from paying sales tax on most farm purchases, for which you’ll need to get an ST-125 form (in NY – the laws and form name will be different in other states) from the State Dept. of Taxation and file it with any store from which you make farm purchases. See the Fact Sheet #17 on Sales Tax Exemptions from the Guide to Farming in NY for more information.Once you’ve made $1000 in sales in a calendar year, the IRS will officially recognize you as a farm and you can count your farm supply purchases as business expenses on your taxes. At this point you will need to file a Schedule F with your annual tax return. See the Farmers Tax Guide from the IRS for more info.

If your business involves processing food in a kitchen, selling dairy products, processing meat, making wine, or selling nursery plants, you may need to apply for licenses or comply with special regulations. See Fact Sheet #27, Marketing Regulations, in the Guide to Farming in NY for more details.

What are the tax benefits to farming?
Farmers are exempt from paying sales tax on purchases of supplies used in farming. Some farm buildings are wholly or partially exempt from property taxes and once a farm generates over $10,000 in sales, the land can also receive a property tax exemption. Income tax exemptions kick in once farm income becomes 2/3 of total income. If you’re farming in NY, you can find more information about how to take advantage of these programs from the Business Considerations section of the Guide to Farming in NY. If you farm in another Northeast state, you may find that your state has its own Guide to Farming publication – search online or check our list of other states’ publications here.
What kind of government incentives are available to me?
There are various types of cost-shares and payment programs available to farmers from the federal government. Keep in mind that there is no such thing as free money; pursuing any of the programs below requires a solid commitment of time and mountains of paperwork to secure any funds that are available. These programs are generally administered by your county Soil & Water Conservation District (SWCD), Farm Service Agency (FSA) or Natural Resources Conservation Service (NRCS). Locate your local office here and contact them to find out about deadlines, fund availability, and whether or not your farm qualifies for assistance.Information on incentive programs may be found at the Natural Resources Conservation Service website

Financial Assistance, Environmental, and Stewardship Programs
Agricultural Management Assistance (AMA)
Chesapeake Bay Watershed Initiative (CBWI)
Conservation Innovation Grants (CIG)
Conservation Stewardship Program (CSP)
Environmental Quality Incentives Program (EQIP) Air, Energy, Organic, and Forestry
Great Lakes Restoration Initiative (GLRI)
Wildlife Habitat Incentives Program (WHIP)

Easement Programs
Farm and Ranch Lands Protection Program (FRPP)
Grassland Reserve Program (GRP)
Wetlands Reserve Program (WRP)

Opportunities for “Historically Underserved” Individuals and Groups
The Farm Bill offers program opportunities for “Historically Underserved” individuals and groups. The Practice Payment rate for is higher than the general rate. More information is available at the NRCS Socially Disadvantaged, Beginning, and Limited Resource Farmers/Ranchers Web page.

What do I need to do to apply?
You need to complete form NRCS-CPA-1200, Conservation Program Application. Forms are available at your local USDA NRCS office, or you may download them from the Download Documents area of each program’s Web page. Applications are accepted on a continual basis, and are held for the next round of funding. For additional information contact or visit your local USDA NRCS office.

What regulations apply when selling my products?
Your state Department of Agriculture can tell you what you need to know about regulations. But many organizations try to help farmers by simplifying, interpreting, or reorganizing the information to make it easier to access and digest. If you’re farming in NY, check out the Guide to Farming in NY for all kinds of regulatory information, or the Resource Guide to Direct Marketing Livestock and Poultry for information specifically related to regulation of meat processing and sales.Experienced farmers–and most organizations that work directly with farmers–will likely be able to answer your questions, so ask those in your support network for information too.
Where can I get help preparing my farm’s tax return?
If you’re looking for a CPA to prepare your tax return for you, try asking farmers in your area for recommendations, as well as contacting your local Cooperative Extension office. Someone in your network should be able to point you to a reputable and knowledgeable tax accountant.If you’d like to do your own taxes but haven’t prepared a Schedule F before (that’s the form used to report farm-specific income and expenses), two great sources for self-education are the Rural Tax website and the IRS Farmers Tax Guide (which can be downloaded from the Related Links page of the Rural Tax website).
What laws will affect me if I have an intern or hired help?
Hiring farm help is fairly straightforward, though it involves a lot of paperwork. Learn about the regulations in the Business Considerations section of the Guide to Farming in NY.Be very careful about how you set up internships. Internships can be a win-win situation, providing a high-quality hands-on learning experience for an aspiring farmer and providing you with non-family farm labor. Offering room and board, or even a small stipend, in exchange for this farm work is NOT considered legal by the Dept. of Labor, unless the intern is also getting credit at an institution of higher learning. If not, you must pay the intern minimum wage. Farms across the country have been nailed for this, so please research carefully before you create a farm internship. The New England Small Farms Institute wrote a carefully-researched report on this subject that covers regulations for New England and NY. You can download it here (PDF).
What are the requirements for a Commercial Kitchen?
See the “Becoming a Small-Scale Food Processor” fact sheet from the Guide to Farming in NY.
What types of insurance should I have?
Please read the “Farm Risk Management” and “Farm Insurance” fact sheets in the Guide to Farming in NY.

If you read the answers to more than one of the questions above, you probably noticed that this section refers constantly back to the Guide to Farming in NY for all your tax, regulatory, legal, and business-related farming questions. Another source of assistance with these questions is the online course BF 103: Taking Care of Business, which is offered every Spring.

Regulations, Taxes, and Insurance

This video is intended as an intro to the detailed information presented in the Guide to Farming in NY: What Every Ag Entrepreneur Needs to Know.

Visit the video gallery to “Meet the Farmers” and view other videos.

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