Bill posed to exempt taxes on manure

AUGUSTA – Through a bill submitted to the Legislature’s Taxation Committee, Maine’s farmers are hoping to correct what they believe is a mistake in how the Maine Revenue Service is interpreting the agricultural exemption.

No one spoke in opposition Tuesday to LD 535, submitted by Sen. Carol Weston, R-Montville, that would clarify that manure is indeed a part of agriculture.

Following the hearing, Weston said she would work to amend the bill to include semen used in livestock breeding as an agricultural exemption.

Supporters of the bill criticized the Maine Revenue Service for not working with the Maine Department of Agriculture to clarify such issues.

Both controversies came to light last fall. Farmers suddenly discovered that sales tax was being added into their artificial insemination bills, and believing that a new tax had been passed, they started complaining. It turned out that the largest supplier of semen for Maine, Genex Inc. of New York, had been absorbing the tax for years as part of the cost of doing business in Maine.

The company stopped paying the tax and began passing it back to the farmers last year, a tax that averages $2 per cow. The average Maine dairy farm has 250 cows, but there are several with 500 and up.

At about the same time, a racehorse breeder in Etna bought an $11,400 four-wheel drive vehicle to remove the manure from his barn. After the purchase, Andrew Watson sought a refund from Maine Revenue Services for the $570 in sales tax he paid.

Testifying Tuesday, Watson said that MRS never looked at what he was using the equipment for, only that it was categorized as an all-terrain vehicle. “If I had bought a John Deere, almost the exact same vehicle, I would have paid no tax,” said Watson, adding that he had checked with several area farmers who had done exactly that.

“I even invited the Maine Revenue Service to come to my farm and see what I’m using the vehicle for,” Watson said. “There was no response.”

Sen. John Nutting, D-Leeds, is chairman of the Legislature’s Agriculture Committee and he told the Taxation Committee that MRS is setting up a confrontational relationship with Maine farmers.

He said the manure and semen issues, along with taxation issues around compost and other agricultural machinery sales, illustrates the “lack of communication between the Maine Revenue Service and the Department of Agriculture.” He said the list of exemptions for agriculture is just an indicator, not the final word.

“We need to have a little bit of common sense,” Nutting said.

Robert Tardy of Palmyra, a former legislator and member of both the taxation and agriculture committees, testified that he helped craft the original bill exempting farm equipment.

“In the years since, Revenue Services has cut away a lot of what we had envisioned as benefits,” said Tardy. Referring to Watson’s manure vehicle, Tardy said “This is not an ATV. This is a work vehicle.”

“The tragedy is that this is before the Legislature at all. These are policy issues,” Tardy said. Looking at the semen and manure taxation issues, he said, “When we get into these nickel-and-dime fights with Revenue Services, everyone becomes confrontational and trust goes out the window.”

A work session on the manure bill is set for 10 a.m. Monday, Feb. 28, at which time Weston said she will attempt to amend the bill to include semen as tax-exempt.