GA Dept of Revenue & AgritourismOutcome: More Information Needed for BOTH Parties

It All Started on a Beautiful May morning…

• GAA Board of Directors meeting, May 4th

• Three Board members revealed they had either finished a GDoR audit or had been contacted to be audited within the next three weeks

• Correspondence mingled premise of the audits

• Audit GATE program card usage,

• Sales tax application (collection and submission),

• Full GDoR Audit

Then “he” said…

• May 11 GAA submitted a formal letter to Bo Warren, GA Dept of Agriculture, who oversees the GATE program for insight and guidance

• Request help with “understanding, working with, and ultimately educating the GDoRas they have identified the agritourism industry to audit regarding sales tax and the use of the GATE program.”

• May 14, Mr. Warren met with GDoR and reported a good meeting

GA Dept of Revenue Reaction

• After being presented the GAA letter, GDoR indicated they were not targeting the agritourism industry

• The GAA Board issued invitation for in person meeting with GDoR on July 30, 2015 at the GDoR headquarters in ATL…scary

• Meeting topics would be focused on tax policy and application in on-farm agritourism operations

• Other issues, including CUVA, will not be discussed

Party Planning

• The major agricultural industry players invited into the discussion:

• GA Farm Bureau

• GA Dept of Ag

• GA Agribusiness Council

• GAA Board decided the ultimate direction should come from the GAA Membership

• AND YOU DELIVERED…

1800 Century BlvdSuite 15300Atlanta, GA

“You have arrived at your destination”

Shirts & Skins:TEAM Georgia Agritourism Association

• Jake Carter, GAA Board Member

• Cynde Dickey, GAA President

• Tim Mercier, GAA Board Member

• Beth Oleson, GAA Executive Director

• Brandon Ashley, GA Farm Bureau

• Jeffery Harvey, GA Farm Bureau

• Sydne Smith, GA Dept of Ag

• Bo Warren, GA Dept of Ag

Shirts & Skins:TEAM Georgia Dept of Revenue

• Deputy Commissioner of Revenue Scott Graham

• Amy Oneacre, Assistant Director Office of Tax Policy

• Anne Whipple, Tax Attorney at Legal Affairs & Tax Policy

Objectives of the Meeting

• To clarify sales tax collection, remission, posting requirements, etc. for the sale of produce, admission onto the farm, attractions, etc.

• Clarify what’s taxable or not

• This is not about GATE specifically, it’s about sales tax

Meeting Outcomes

1. Help us understand the GDoR rules and regulations so we can help educate the industry

2. Possible tool to help provide clarification of sales tax application, submission, and exemption

3. GDoR representative(s) to be the liaison to the agritourism industry

4. Begin a relationship and dialogue with GDoR

The Nitty Gritty

Your Questions, Their Answers

PPT Information Legal Advise

The information presented in the presentation is for general

information only, and should not be used as a substitute for

advice from a legal or tax professional

Is there a signage/posting requirement at the entry gate?

Example: show the price of admission with the statement “sales tax included,” if someone is wanting to charge a flat rate for admission, should they show the price broken down without sales tax, etc.?

• GDoR Response: There was no special signage requirement to specify tax inclusion or not. Tax inclusion (posting a price which has the sales tax built in) has been used for years. Documentation of your records to clearly show the price, the sales tax, and the amount you remitted.

Is produce grown on the farm and sold unprocessed on the farm, roadside stand or farmers market subject to state, local, and/or any other sales tax?

GDoR Response: It depends. OCGA 48-5-356 (2015) for Ad Valorem Taxation of Property, Municipal Taxation:

• Exemption from municipal taxation of agricultural products and livestock raised in state. No municipality shall levy any tax or license fee or shall require the payment of any fee or tax upon the sale or introduction into the municipality of any agricultural product raised in this state including, but not limited to, swine, cattle, sheep, goats, poultry, and the products of such animals when the sale and introduction are made by the producer of the product and the sale of the product is made within 90 days of the introduction of the product into the municipality. The exemptions provided in this Code section shall be in addition to all other exemptions from taxation and licensing provided by law for any such product.

Is produce grown on the farm and sold unprocessed on the farm, roadside stand or farmers market subject to state, local, and/or any other sales tax?

• GDoR Response: It depends. 560-12-2-.104 Food Exemptions

• Food meant for off-premise human consumption and not classified as Prepared Food (see below) is only subject to local sales tax but it is exempt from state sales tax. This would include fresh produce, apple cider, etc. However, if the food is meant for on premise human consumption and considered Prepared Food, then both local and state sales tax would apply.

• O.C.G.A. 48-8-2 (2010) (27) (A) "Prepared food" means:• (i) Sold in a heated state or heated by the seller;

• (ii) With two or more food ingredients mixed or combined by the seller for sale as a single item; or

• (iii) Sold with eating utensils provided by the seller, including plates, knives, forks, spoons, glasses, cups, napkins, or straws. A plate does not include a container or packaging used to transport the food;

Can GDoR offer clarity to OCGA (48-8-3) (57) (A-D) State Grocery Sales Tax Exemption:

Is pasteurization considered further processing or processed foods? For example apple juice sold as cider.

• GDoR Response: No, pasteurization is not considered processing or processed food.

Can GDoR offer clarity to OCGA (48-8-3) (57) (A-D) State Grocery Sales Tax Exemption:

If pasteurized apple juice is not considered a prepared food, would it be considered a locally produced product that would then be exempt from food tax, only local option tax?

• GDoR Response: This all depends on how it’s sold. Keep in mind the definition of Prepared foods (heated, 2 or more ingredients, food sold with utensils). If the cider is sold in a container meant for off-premise consumption (jug, jar, etc.), it would be exempt from local sales tax. If, however, the cider is sold by the cup (which is considered a utensil and therefore makes it a prepared food due to its intent for human consumption on-premises) then it will be subject to local and state sales tax.

Taxes based on unit of sale?

Several farmers who operate and/or sell at farmers markets have been told by GDoR inspectors over the years that if they sell in volume such as a peck, ½ bushel, etc. and not in pounds, ounces, etc. they don’t have to charge or remit sales tax.

• GDoR Response: This is false. There is no regulation that bases the responsibility to remit taxes based on the unit of sale.

Admission fees: The larger issue is all the variations of how farms charge admission

a) If a farm charges a fixed price admission to go on farm and it includes a basket of produce they pick, it is subject to sales tax?

i) Flat fee for admission, includes all attractions, tours – you-pick produce is included

ii) Flat fee for admission, includes all attractions, tours – you-pick produce is NOT included

iii)Entry fee with additional fees for each tour, attraction, you-pick, etc.

b) If there’s a ride component of the picking, do you have to break out due to another tax rate? For example, the person rides on the hay-ride pulled by a wagon to get to the field/orchard to pick the produce.

c) If sales tax is to be added to or simply remitted for admission, what % needs to be added to the charge or remitted?

Admission fees: The larger issue is all the variations of how farms charge admission

GDoR Response:

• Instead of trying to work through all the scenarios given, GDoR poised the question “what is the object of the charge”.

• If there is one fee which makes available “many things” including rides and attractions, not just access to the you-pick operation, it will more than likely be more of an admission than a fee which includes the price of the you-pick product.

• GDoR is working on a guidance document for admission fees. This will be a much larger document than just agritourism but it may provide some clarification for the agritourism industry.

GATE Purchases

• Pine bark mulch is used for all my small berry production which is also a big part of my You-Pick operation. I buy large quantities at a time. If, after all the berry beds have been covered, a few wheel barrow fulls of mulch is left over, could I use it for the Georgia Grown educational garden used in our educational tours just outside of my farmers market?

• Without over ordering, could I also use the left over mulch around the farmers market? I know mulch purchased for landscaping is NOT exempt but this was not purchased for landscape and will just sit there until the next production cycle.

• GDoR Response: No. Basically there needs to be accountability for items subject to tax as well as those not subject to tax. If the extra mulch is used in areas outside the tax exempt allocations, the operation would need to accrue and remit sales tax on Sales and Use Tax Return (ST-3) Form. This procedure can also be followed to report and pay sales tax on non-GATE qualified items that were inadvertently purchased with the GATE card.

GATE Purchases – TAKE AWAY

• To report and pay sales tax on non-GATE qualified items that were inadvertently purchased with the GATE card

• Remit sales tax on Sales and Use Tax Return (ST-3) Form

GATE Purchases

• Can I use the tax exemption when I purchase the plastic containers used for my you-pick operation? These baskets are sold to the consumer to cover the cost of the strawberries. The consumer then takes the basket into the field, fills it with berries and takes it home. Wouldn’t that be considered a packing container?

• GDoR Response: Yes it would be considered a harvest container and therefore would be eligible for GATE tax exemption, even if it’s a reusable basket and regardless of whether or not the public takes it home or it stays with the agritourism operation.

For Farmers Markets, not on the farm, what kind of records do we need to keep in order to remit applicable tax?

• CLARIFICATION NOTES:

• Most of these are cash operations.

• There are no specific computer or recorded entries to show the details of each sale. At times there may be cash or credit card receipts.

• Currently many people just ‘backed out’ the tax to be remitted, which we’ve been told is not ideal. What’s the solution?

• GDoR Response: It is the operator’s responsibility to keep adequate records showing sales in order to substantiate the amount of sales tax remitted to the state. This would include the sales amount of “food”, “prepared foods” and other merchandise.

Is there a way to keep it all straight without having to invest in lots of expensive computer equipment?

• NOTE:

• Most agritourism operations are family operated facilities that have expanded year-by-year with their market/customer demands.

• A market (large or small) could be selling raw agricultural commodities (for example apples), processed foods (for example apple pie), and merchandise, operation which are all taxed differently.

• GDoR Response: This was not addressed directly but was indirectly addressed in their comments stating it is up to the business to keep adequate records to remit appropriate sales tax.

School Field Trips

1) School field trips have always been a heavy consumer of agritourism operations. We’ve come to understand school tours without educational curriculum is subject to sales tax. Can you provide additional clarification?

2) We’ve also come to understand schools coming on a field trip must pay with an official school check and fill out tax exempt form in order to qualify for sales tax exemption for admission.

• If the school has not issued a check and a teacher or parent writes the check for the school field trip admission with the intent to be reimbursed by the school for the admission fee, is that not qualified for sales tax exemption?

• If a parent wants to pay with a personal check to allow children unable to pay the school for the admission fee of the field trip, is that, then, not qualified for sales tax exemption?

• We’ve also come to the understanding that sales tax exemption for admission is only for the children and not for the teachers, bus drivers, parents/chaperones. Why? The field trips would not be possible without those key adult/non-student personnel.

School Field Trips – GDoR Response

• GDoR Response: Public schools are exempt for educational purposes. The term “educational purposes” tends to have a very broad meaning and application. The curriculum does not have to be provided by the GDoEd, it must simply be an educational field trip.

• (We got the feeling from the conversation if a teacher/school has deemed the tour/field trip as educational, it should be considered as such. )

School Field Trips – GDoR Response

• It was suggested by GDoR that pricing and terminology be specific to educational school field trips to help with documentation in the future. They did not feel the field trip was substantiated with an official school check and felt the acceptance of a teacher or parent paying for the field trip was acceptable.

• When asked if chaperones, parents, teachers, etc. would also be included in the tax exemption, it was stated if the school is paying for the admission of the chaperone, parent, teacher, it would be included in the sales tax exemption. If chaperones, parents, etc. would be paying separately from the school, they would not be tax exempt.

School Field Trips – GDoR Response

• We asked if home school groups would be excluded as they were not all “official” groups. GDoR felt if it is an educational tour, it would be included in the tax exempt category. Again, it was suggested agritourism operations structure invoicing and fees as “educational” to avoid miscommunications for future audits.

Adult Ed Tax Exempt?

If an agritourism operation holds an educational workshop on their farm (whether there is a fee for the workshop or not), we’ve come to the understanding that any tours charged in conjunction with the workshop is sales tax exempt. Is this correct?

• GDoR Response: Again, if the workshop/tour is deemed educational, it is tax exempt.

Additional Regulatory Issues

Definitions, CUVA, GATE

“Agritourism is not agriculture” – GDoR GATE Auditor

• GDoR has no idea how to approach agritourism.

• Amusement park?

• Exhibitions/event venue?

• Athletic contests?

• Part of the problem – No official definition of agritourism

Definition(s) of Agritourism:

• As defined by the Georgia Agritourism Association:

• agritourism is when farm operators, managers, landowners, landlords and tenants in shared tenancies, who is a producer of an agricultural commodity(s) and allow the public to visit the working agricultural operation for the purposes of experiencing, including but not limited to, education, entertainment, relaxation, hospitality, shopping and dining.

• As defined by OCGA 48-5-7.4 (2014) CUVA:

• Agritourism means charging admission for persons to visit, view or participate in the operation of a farm or dairy or production of farm or dairy products for entertainment or educational purposes or selling farm or dairy products to persons who visit such a farm or dairy.

CUVA

• Continues to be an issue due to the variability in interpretation and application

• Main take away for AGRITOURISM OPERATIONS:

• Understand CUVA

• Work with local officials

• Make friends at 2016 GA Agritourism Annual Conference

GATE Update

• February 4, House Bill 911

• Provides for changes in the Georgia Agricultural Tax Exemption (GATE) program

1. Moves the $2,500 minimum in annual sales up to $10,000

2. Shifts some of the registration and oversight from the Dept. of Agriculture over to the Dept. of Revenue

3. Requires retailers to put forth a “good faith effort” to separate inventory items that are not GATE qualified

• Anna McIntyre, GAC

Bragging Rights - GATE

• Due to the regulatory involvement with the GDoR, GAA was invited to the Agricultural Industry Stakeholders meetings (a.k.a. “Big Kid” table) to discuss potential changes for the GATE program.

Industry Tools Needed

GA Agritourism Resource Guide – Sales & Property Tax

• Author, Brandon Ashley, GFB

• Still in DRAFT

• Sales Tax considerations

• Collections

• GATE Program

• CUVA

• Agritourism Related Examples

• Possible additions – Mail Order Sales Tax

GAA is the United Voice of AgT

• GAA is here to stand in the GAP for you

• How can we serve you?

• Questions??