More and more farmers are selling directly to consumers these days. It’s a good thing to buy local, especially to support your local farmer, but with that comes the responsibility of knowing how that transaction could be affected by any taxation through the Virginia Retail Sales and Use tax. Just because the transaction isn’t taking place in a conventional market place doesn’t mean it’s not a taxable sale. There are circumstances where no sales tax should be charged, in occasional sales, or those that qualify at a farmer’s market or a roadside stand (§ 58.1-1707), but in general farmers should know what the law is and when they need to register as a business with the Virginia Department of Taxation, as well as know when to collect the sales and use tax.
It’s also important for farmers to know what purchases they make are taxable. Often farmers think that all farm purchases are exempt from the sales and use tax, but, in reality, the purchase must be for something used in the production of an agricultural product for sale. All farms are equal, especially when it comes to species of animals or crop, but the purchase must be made as an input cost in making a product for sale.
We had a Plows and Politics post in 2012 that reviewed the law and shared a Virginia Cooperative Extension publication on direct sales and taxation, you can view that post here: Extension article: Direct Marketers and the Virginia Sales Tax. We’ve created a more “farmer-friendly version” that offers examples of various scenarios. We have also updated form references and web links in the Extension publican. Both can be found in the Virginia Farm Bureau Legislative Resource page which can be found here: https://www.vafb.com/membership-at-work/farmers-in-action/legislative/resources
The Virginia Farm Bureau Legislative Resource page was developed to provide farmers with information on laws and programs. Currently there are six categories Commodities, Eminent Domain, Farmland Preservation, Forestry, Taxation, and Transportation. When you go to the page, click on the category and all of the resources for that topic will show, just click on it and either the document will open or it will take you to the webpage referred to. We’re expanding it as we go, if there’s a category or issue you think should be added let us know!