Murdock to take deep dive into agricultural sales tax exemption

Thousands of agricultural producers in Oklahoma claim an agricultural sales tax exemption – a tool that keeps farmers and ranchers, as well as agricultural businesses, profitable in a competitive market.

After changes to the agricultural sales tax exemption process were made by Senate Bill 422 in 2021 to expand the qualifying documents producers can use to prove they own an agricultural enterprise, Sen. Casey Murdock, R-Felt, said he wants to closely examine minor changes that can be made to the renewal process to ensure the exemption will continue to be obtained and used by agriculturalists.

“Protecting our ag sales tax exemption is critical to the future of rural Oklahoma,” said Murdock, chairman of the Senate Agriculture and Wildlife Committee. “In today’s industry, it’s not uncommon for producers to drive 150 miles to save 10 percent on their ag purchases. We need to make sure our exemption is obtainable to producers, but more importantly, easy to renew. The last thing we want is agriculturalists driving across the border to purchase their goods. We need and want these agricultural transactions in our state.”

In order to qualify for a sales tax exemption, an applicant must provide one of the following:  an IRS Schedule F, IRS form 1065, or IRS form 4835, or any equivalent form prescribed by the IRS; a one-page business description form provided by the Oklahoma Tax Commission (OTC); a Farm Service Agency 156EZ; or other documents at the discretion of OTC to verify active agriculture production.

Once a farmer or rancher receives a sales tax exemption from the OTC, it’s valid for three years before it’s up for renewal. Upon renewal, Murdock said he wants to make it convenient for producers to be re-issued an exemption.

“This study will allow us to find solutions to ensure an easy process for renewing ag sales tax exemptions,” Murdock said. “What this may look like is still up in the air, but I’m hopeful something as simple as a box farmers and ranchers can check to attest that their operation has not changed since the previous year, which would qualify for automatic renewal, could be the answer.”

The study will be held jointly with Rep. Jim Grego, R-Wilburton.

“I’m glad for legislation such as Senate Bill 422, which gives farmers and ranchers the options for what they provide to obtain their sales tax exemption,” Grego said. “But I believe additional changes are in order. Agriculture is the backbone of rural life, and we must make it as easy as possible for our producers to obtain this exemption as they work to feed us and provide us with products necessary for daily life.”

Rep. Carl Newton, R-Cherokee, is also involved in the study.

“I’m glad to study these concerns in detail to make sure obtaining this sales tax exemption is done properly for all true agriculture producers,” Newton said. “We want to guarantee those who are entitled to this exemption receive it while protecting the integrity of the process.”

The study will be conducted by the Appropriations and Budget Finance – Revenue and Taxation Subcommittee in room 535 on Monday, Sept. 13 at 12 p.m. Speakers will include Jessica Grogis, Oklahoma Tax Commission; Michael Kelsey, Oklahoma Cattlemen’s Association; RJ Gray, Oklahoma Agricultural Cooperative Council; Scott Eisenhauer, P&K Equipment; Shawn Lepard, Lepard Consulting; and Brenda Neufeld, Farm Tax Accountant and producer.

The study will be livestreamed at www.oksenate.gov.