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Tax Exemption a Win for Nebraska’s Economy and Ag Producers

Note from Farm Credit Services of America: We are monitoring state legislation that affects our customers in Iowa, Nebraska, South Dakota and Wyoming. We will share the progress of various bills as they make their way through each state’s legislative process.  

farm equipmentNebraska is one of eight states still charging sales tax on repairs and parts for ag equipment. All but one neighboring state – Wyoming – treat ag repairs and parts as tax exempt. That puts Nebraska implement dealers, especially those bordering tax exempt states, at a distinct disadvantage in a high-competition industry.

Even when prices are good, profit margins are slim. And inputs continue to climb. So shopping around to save dollars is just part of running a profitable farm or ranch. It’s not uncommon for producers to travel additional miles to avoid paying higher prices, including sales taxes.

Each trip across the Nebraska border helps solidify business relationships, often turning comparatively modest amounts spent on repairs into big ticket purchases of equipment from out-of-state dealers. Just how often does this happen? Consider this: Nebraska's pace of job losses in the farm equipment business was more than three times that of bordering, tax-exempt states.

A similar disparity exists within the state. Nebraska equipment dealers located near bordering states lost 16.3 percent of their jobs compared to 5.8 percent among dealers operating in the interior parts of the state. There are no longer dealers operating in Brown, Furnas, Dixon, and Johnson Counties, accounting for a loss of about $900,000 in annual payroll for those four counties, according to a study titled, “The Economic Impact of Exempting Farm Repair and Replacement Parts from the Nebraska Sales Taxes.”

The data in this report is compelling and makes a strong case for Legislative Bill 96, which would exempt repairs and replacement parts for commercial agriculture machinery and equipment from sales and use tax. Sponsored by State Sen. Annette Dubas of Fullerton, the bill is in the final stage of debate in the Nebraska Unicameral. 

According to the study, adopting the tax exemptions of neighboring states “would spur jobs and sales at Nebraska agricultural equipment dealers. There also would be a ‘multiplier’ effect on the overall economy for Nebraska communities where agricultural equipment dealers are located. Greater income and employment at equipment dealers would spill over into new sales at businesses throughout these communities.”

Farm Credit Services of America supports the legislation.

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