35: When Am I a Farm?
35: When Am I a Farm?
The answer to this question varies, as different programs and agencies each have their own thresholds for what is officially considered a farm. Below are some basic first steps to follow to create a farm business and start generating sales. The table following the checklist provides some information sources for understanding what it means to achieve various sales levels.
Checklist for Starting a Farm
- Register your farm name as a DBA (“Doing Business As”) or an LLC:
Consult Fact Sheet #13 Business Structures in this Guide to learn more about how to do this, and other options for legal structures. Do a thorough search online of any farm name you are considering, to see who else is using it, and whether the website URL and social media handles you want are available. - Open a business bank account:
From the very beginning, you should keep your farm income and expenses separate from your household finances. Open a bank account in the name of your farm business, and transfer some seed money into it so you’ll have funds to purchase your start-up supplies. If you use personal savings for this seed money, keep track it as your equity in the farm business. If you use a loan, you’ll need to track that too, which leads to the next step: - Choose a method to track expenses (save receipts) and income:
See Fact Sheet #15 Record Keeping in this Guide for some options. - Register your farm with the Farm Service Agency (FSA) and get a farm #:
The FSA is the financial arm of the US Dept of Agriculture. They maintain an office in nearly every county; search online or use this search tool to locate the one that serves farms in your area. https://offices.sc.egov.usda.gov/locator/app
Why is it important to register as a farm “operator” with FSA? Two reasons: even if you are leasing the land on which you are farming, you will be counted as part of the Ag Census, and whenever there are programs that could provide funding or conservation assistance to your farm—like farm loans, crop insurance, disaster assistance compensation, or cost-share on fencing or pollinator planting--you will already have a record set up with the FSA. And you’ll be on their contact list so you are more likely to hear about upcoming funding sources! - Get Farm Insurance, including Product Liability:
See Fact Sheet #5 Farm Risk Management and Fact Sheet #6 Farm Insurance in this Guide for an overview on types of insurance and considerations as you shop around. - Start selling crops or livestock:
(Note: Some benefits of being a farm are applied as soon as you start producing a multi-year crop – like perennial woody species or beef cattle – rather than when you start selling.) - Include your farm sales and expenses on your annual tax return :
If you make $1,000 in sales, you should file a Schedule F with your federal taxes. It’s worth finding a tax accountant with farm expertise to help with your taxes, as there are many special considerations for farms with which general tax preparers or accountants are not likely to be familiar. See Fact Sheet #16 Income Taxes for more detail.
Fact Sheet Overview
Farming Milestones
| Criteria | Implications | Agency |
|---|---|---|
| You are purchasing any supplies to be used in the production of farm goods for sale | You do not need to pay sales tax on most farm-related purchases. Locate the ST-125 Sales Tax Exemption form (see Fact Sheet #17 Sales Tax Exemptions and Refunds in this Guide, https://smallfarms.cornell.edu/guide/guide-to-farming/sales-tax-exemptions-and-refunds/). Bring this form with you when you shop, and give a copy to each vendor. If you check the “blanket use” box, they will have it on file all year so you won’t have to submit it to them again, though you will need to remind them at each purchase that you are exempt from sales tax. | NYS Dept of Taxation and Finance |
| $1,000 in gross sales | You will be expected to keep financial records, including all receipts, and submit your farm income and expenses on the Schedule F form as part of your annual income taxes. See Fact Sheet #16 Income Taxes for more detail, https://smallfarms.cornell.edu/guide/guide-to-farming/income-taxes/ | Internal Revenue Service |
| $10,000 in avg gross sales over 2 years ($50,000 if you farm on fewer than 7 acres) | You (or your landlord, if you rent land) will qualify for Agricultural Assessment on property taxes, which lowers the amount owed annually. See Fact Sheet #21 Ag Value Assessment for Farmland in this Guide for more detail.https://smallfarms.cornell.edu/guide/guide-to-farming/agricultural-value-assessment-farmland/ | Town/County Assessor’s Office |
| Farm income is at least 2/3 your total household income | The Farmers’ School Tax Credit allows you to receive a credit on your State Income Tax equal to 100% of the school taxes paid on the first 350 acres of property and 50% of the school taxes paid on the acreage beyond 350. To learn more, see Fact Sheet #16 Income Taxes, https://smallfarms.cornell.edu/guide/guide-to-farming/income-taxes/ | NYS Dept of Taxation and Finance |
