Qualifying and Conditional Farmers

Overview

North Carolina allows qualifying and conditional farmers registered with the Department to purchase eligible items exempt from sales and use tax. In addition, certain service providers and contractors performing services for a qualifying or conditional farmer may purchase eligible items exempt from sales and use tax.  This page provides an overview of these exemptions and the registration process.    

Types of Farmers

Qualifying Farmer

A qualifying farmer1 is a person who has an annual gross income from farming operations for the preceding income tax year of ten thousand dollars ($10,000) or more or who has an average annual gross income from farming operations for the three preceding income tax years of ten thousand dollars ($10,000) or more. "Income from farming operations" means sales plus any other amounts treated as gross income under the Internal Revenue Code from farming operations.

A qualifying farmer includes a dairy operator, a poultry farmer, an egg producer, a livestock farmer, a farmer of crops, a farmer of an aquatic species, as defined in G.S. § 106-758, and a person who boards horses.

Conditional Farmer

A person who currently does not meet the definition of a qualifying farmer may request a conditional farmer exemption certificate. To receive a conditional farmer exemption certificate, a person must certify that:

• They intend to engage in farming operations, and
• They will timely file State and federal income tax returns that reflect income and expenses incurred from farming operations during the income tax years that the conditional farmer exemption certificate applies. 

A person issued a conditional farmer exemption certificate may purchase qualifying items exempt from sales and use tax to the same extent as a qualifying farmer. Refer to the Frequently Asked Questions for additional information regarding the conditional farmer exemption certificate.

Registration

A person must file an application form to request a farming exemption certificate.  The application form depends on the type of farming exemption certificate requested by the person.  The chart below provides the application form by type of farmer.

Exempt Purchases

Purchases by Farmer

A qualifying or conditional farmer is allowed an exemption from paying sales and use tax on certain purchases of items used by the qualifying or conditional farmer primarily in farming operations according to G.S. § 105-164.13E. Farm machinery, attachment and repair parts for farm machinery, fertilizer, feed, seeds, and livestock are a few examples of items that can be purchased by a qualifying or conditional farmer exempt from sales and use tax. Refer to Sales and Use Tax Bulletin 27 for a more comprehensive list of items eligible for exemption.

Items must be for use by the qualifying or conditional farmer primarily in farming operations to qualify for the exemption. For purposes of the exemptions available to qualifying or conditional farmers, an item is used in farming operations if it is used for the planting, cultivating, harvesting, or curing of farm crops, in the production of dairy products, eggs, or animals, or for boarding horses. If an item is used for both farming operations and other purposes, the farmer must retain documentation showing the item is used primarily in farming operations to qualify. Items not used primarily in farming operations are subject to the applicable rates of sales and use tax. 

A qualifying or conditional farmer should enter their assigned qualifying or conditional farmer exemption number on Form E-595E, Streamlined Sales and Use Tax Certificate of Exemption, to purchase qualifying items exempt from sales and use tax. 

Contracts with Farmers

In certain situations, a person performing a contract for a qualifying or conditional farmer may purchase items to fulfill the contract exempt from sales and use tax to the same extent as if purchased directly by the qualifying or conditional farmer. A contractor making qualifying purchases must provide Form E-595E, Streamlined Sales and Use Tax Certificate of Exemption, to the retailer that includes the name of the qualifying farmer or conditional farmer and the qualifying farmer or conditional farmer exemption number issued to that farmer. Refer to Sales and Use Tax Bulletin Section 27-7 for specific information regarding the items that qualify and more details regarding the procedure for purchasing those items exempt from sales and use tax.

Services for Farmers

In certain situations, a person performing certain services for a qualifying or conditional farmer may purchase items to complete the service exempt from sales and use tax to the same extent as if purchased directly by the qualifying or conditional farmer. A person making qualifying purchases must provide Form E-595E, Streamlined Sales and Use Tax Certificate of Exemption, to the retailer that includes the name of the qualifying farmer or conditional farmer and the qualifying farmer or conditional farmer exemption number issued to that farmer. Refer to Sales and Use Tax Bulletin Section 27-6 for specific information regarding the items that qualify and more details regarding the procedure for purchasing those items exempt from sales and use tax.

Other Resources

Frequently Asked Questions Regarding Farmers

Sales and Use Tax Bulletin 27 includes detailed information on the following:

• Specific exemptions available to farmers as well as examples.
• Agricultural exemptions available.
• Zoo operation exemption for farmers.

• 1

  Defined in G.S. § 105-164.13E.(a).