MachineryLink

If you work with farm machinery at all, you know at some point a tractor/combine/implement will experience mechanical failure and will have to be repaired. I have many hours of first-hand experience attempting to repair less-than-new farm machinery, but even newer farm equipment might have to be taken to the implement dealer once in a while.

Other than the lost time in the field and a special trip to town, the worst part of this situation for farmers is the high cost of farm machinery repair labor. While I am sure some farmers can do a majority of repairs themselves, for the rest of us sometimes you just don't have the knowledge or even the right tools to repair the problem and you find out quickly labor costs are VERY expensive.

In Minnesota, labor on farm machinery repairs got a little more expensive thanks to the state government.

During the 2013 Minnesota legislative session, a sales tax was proposed on various business-to-business services. Included in this proposal was a sales tax on the labor of farm machinery repairs. Farm equipment parts were not included.

Chris Radatz, executive director of the Minnesota Farm Bureau, said in the last month of the legislative session the tax bill was slimmed down some. In addition, agriculture was expected to receive an exemption from this sales tax.

Because of the wording of the bill, somehow agriculture was not exempted and thus the sales tax on farm machinery repair labor was included in the bill, which was passed, and took effect July 1, 2013.

"Plain and simple, it was a mistake as agriculture was supposed to be exempt from this sales tax," Radatz told DTN.

Radatz said the Minnesota Farm Bureau has heard from some farmers who have had to pay the sales tax on the already high cost of farm machinery labor. The organization expects more calls from upset farmers as the corn silage and grain harvest seasons begin and farmers have to pay to repair broken equipment.

The Minnesota farm equipment labor sales tax "mistake" could have been addressed in a special session, which took place on Sept. 9, to discuss disaster relief, but the topic was not addressed, according to Radatz. The governor calls the special session but both political parties have to agree to the issues to be debated during the special session.

Minnesota state Democrats in the legislature were in favor of addressing the sales tax on farm equipment repair labor while state Republicans wanted to address other ag exemptions in the sales tax bill. Thus, they could not agree, so the issue was not addressed in the special session.

Radatz said the sales tax on farm machinery labor will now have to wait until Feb. 25, 2014 -- the date of the beginning of next year's legislative session. Realistically, it will probably be March before anything can be done to repeal the law, he said.

Eliminating the sales tax from farm machinery labor will not be as simple as removing it from law. The problem is the $28 million expected to be collected over two years needs to be replaced by some other tax, he said.

Radatz said Minnesota farmers need to know a couple of important points about this sales tax.

First of all, this sales tax is only on labor, not farm equipment parts. Farmers need to make sure their bill is itemized from the repair shop so the sales tax can only be applied to the labor, not the parts.

"Smaller repair shops might just lump repairs and parts together so farmers really need to see if they can get their bill itemized to make sure the sales tax is only on the labor not the parts," he said.

Secondly, Radatz recommended farmers keep clear records of all repairs and labor costs made since July 1, 2013.

The Minnesota Farm Bureau is working to possibly establish a credit back to farmers who had to pay the sales tax on farm machinery labor during this time considering it was not supposed to be in the bill in the first place. While no guarantee, Radatz is hopeful a credit will be created when the tax is debated next year.

In the meantime, Minnesota farmers will have to live with the machinery repair labor sales tax "mistake."

Russ Quinn can be reached at russ.quinn@telventdtn.com

(AG)

(JP/CZ)

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