Tax exemption sought for header trailers, seed tenders

Certain agricultural machinery and equipment would not be subject to state sales and use tax under a bill heard Feb. 24 by the Revenue Committee.

Sales and use tax currently may not be imposed on the gross receipts from the sale, lease or rental of depreciable agricultural machinery and certain equipment used in commercial agriculture.

Under LB672, introduced by Sen. Dave Murman of Glenvil, agricultural machinery and equipment would be defined as tangible personal property used directly in cultivating or harvesting a crop, raising or caring for animal life, protecting the health and welfare of animal life or collecting or processing an agricultural product on a farm or ranch.

The bill also would specify that agricultural machinery and equipment includes header trailers, head haulers, header transports and seed tender trailers.

Murman said the definition is needed to provide guidance and clarity to the agricultural community and the state Department of Revenue, which he said has applied the current exemption inconsistently.

“All of these items have a specific purpose used directly in agriculture and are not used for other purposes,” he said.

Al Juhnke testified in support of LB672 on behalf of the Nebraska Pork Producers Association and several other agricultural groups. He said the bill’s passage would bring “sighs of relief” from Nebraska farmers and ranchers.

Juhnke said the department decided in recent years to impose sales tax on equipment that it has never taxed before.

“There’s some brand-new taxes being invoked by the Department of Revenue,” he said. “We’ve tried internally to correct it over the last two or three years and been unsuccessful.”

John Hansen, president of Nebraska Farmers Union, also testified in support. He said similar disputes have centered on the department’s interpretation of whether an exemption applies to multipurpose machinery that could be used for agriculture, construction or recreation.

However, Hansen said, the specialized equipment in question clearly is used for commercial agriculture and should be covered by the current exemption.

“There’s just not much of a case to be made that a header trailer is used for some other reason than agriculture,” he said. “If you have a seed tender, what else would you use a seed tender for?”

Tim Keigher testified in support of the bill on behalf of the Iowa-Nebraska Equipment Dealers Association. He said the issue arose some years ago when the department audited several equipment dealers and asked them to remit sales tax on certain items.

In most cases, Keigher said, the dealers paid it themselves rather than ask customers to pay it after the fact.

No one testified in opposition to LB672 and the committee took no immediate action on it.