starting a farm - licensing, taxes, etc?

[outofmire]

What type of business license do I need for raising and selling dairy goats if I want to claim it on my taxes? I also plan to sell chickens and pork, as well as herbs and veggies at market. I won't be making any money at first, but I want to be able to claim my expenses as a loss anyway.

Also, do I need to register a farm name with someone, or is that part of the licensing?

[Big Dave]

In Arkansas if you sell directly off the farm you are not taxed. If you sell at a farmers market you can be. There is no license per es if you are in the rural areas, I do not know about the area you are in but if you are in an incorparated area you may not do any of this.Contact your county extention agent and a good cpa. You can find both in the phone directory.

[rancher1913]

be carefull and consult a tax advisor early on. I'm in the system at the USDA, other than that I don't need a license were im at. I don't currently sell at farmers markets so I don't know about what all you need to do that. I have to maintain 2 seperate checking accounts, 2 seperate electric meters, basicly 2 of everything and keep every reciept you get. if you show a loss like 3 out of 5 years the IRS can declare you a hobby and go back several years to collect.

[Ken Scharabok]

In 15 years only once have I declared a profit on Form F. Haven't been questioned yet on it. If audited it would help if you can show you are in it as a business, such as getting publications such as Dairy Goat Journal, Small Farm Today or even Countryside magazine or occasionally attending a conference or participating in the county fair.

Depreciation is the main reason farming doesn't show a profit.

In TN I don't need to keep aspects separate. For example, I combine my farm and cattle related into one checking account and my eBay stuff in another - although I really don't need to do so. At the Co-op I have two accounts, one of which is set up not to charge state sales tax. At one hardware/plumbing/electric business the entire account is set up to not charge state sales taxes. I pay cash for non-farm, non-eBay-related items.

Check into having to charge state sales taxes. In TN, I only need to apply it to items remaining within the state. Easy form to fill out and I submit quarterly. But then as far as it is 'business' related I don't have to pay state sales taxes either on a use or sale certificate. Likely some differences between farm and merchandise.

I prorate some expenses, such as utilities and property taxes, based on a best guess.

Likely requirements vary from state to state.

[fantasymaker]

I try to show a little profit every year .....just makes things simpler!

[GoatsRus]

Get a sales tax exempt certificate. Also don't be surprised is you don't get a booklet for the USDA requiring you to fill out your information. I won't help to ignore it either. Eventually they will phone you and take all your information over the phone. Ask me how I know ...........

[travlnusa]

I would suggest you get a seperate checking account for the farm.

Other than that, file a schedule F with your taxes. Remember, if you need a few nails to fix a fence, buy the big box, write off the nails, and you have the rest for future use. This would apply to just about anything you would use for anything farming related.

[ET1 SS]

I file a schedule F every year.

We have never shown a profit yet.

No licenses, no permits.

[Ross]

I hired profesionals to tell me what I need to operate legally, to file my taxes, and to advise me when I ask if something I want to do can be done more effectively tax wise. I focus my attention of the task of making money. Some people can do it all I'm sure but not me. It'd make me a miserable old koot.

[fordy]

.............You need to understand the Difference between a "Hobby vs For Profit Business" , when filing Sch F-Farm from the IRS point of view ! For instance , if you are raising\selling\breeding horses the reg's say you should show a profit 2 out of 5 , OR 3 out of 7 consecutive tax years ; I don't remember which fraction it is . They can , IF they choose too , classify your activity as a Hobby and Disallow ALL your loses(from prior tax years) thereby incresing your taxable income for those years ! Seek the advise of a Tax profesional , and get yourself educated before you set up your business ! , fordy

[fordy]

..............One more point , IF you get a tax exemption certificate , and various other things like an Assumed name Certificate , You will ALSO be informing the local taxing Authority that you're "In Business" which means they'll be sending you a Form so you can LIST all your depreciable Assets then they'll send you a Tax notice due , each Year .
..............The LESS official forms you file the better off$$$ you'll BE ! , fordy

[Pat]

I live in Marion County... and have a CPA do our taxes.

Because we only have 15 acres... it's classified as a berry / fruit operation (and we have several berry patches, and I've planted over 100 fruit trees)... I also have a couple of Highlands, and hair sheep... and raise 3 feeder pigs every winter.

I don't do the seperate check books... but keep track of all checks (and the 1 credit card) with quicken... and bring in the deposits and expenses printed out from quicken when we take them to the CPA.

Being berry / fruit means I have much longer to show profit (most fruit trees are 3 - 5 years before producing the first fruit, and several more before having enough to really be able to sell.

Deposits are for the eggs, the "extra" meat (we only keep 1 - 1 1/2 pigs, a side of beef, and a couple of lambs)... haven't really gone to farmers market yet as been able to sell everything I want to by word of mouth. (raised turkeys for Thanksgiving for 2 years... but everything is on a small scale.)

For me, the key was finding a good CPA that was familar with farming (both big and small)... The fact I sell things every year (and while not making a profit) shows that I'm trying.

Pat

[rambler]

Don't know what your state requires, typically they just feed off of the national IRS forms. Only issue with most states is how they handle sales tax, if your state has any. Some items used for farming are tax exempt from state sales tax; need to find out how to deal with that for your state.

Fedral taxes, end of the year by the last day of Feb you need to know your Schedule F stuff. If you made money you need to send in your tax; if you didn't make money you have until the typical April 15th to file the schedule F.

Farm deductions fall into 3 parts: short term (feed, fertilizer, fuel, small parts & bits) that get deducted in the year they were bought; mid-term (tractor, machinery, etc.) that are pro-rated over 5-7 years, each year you get to deduct 1/5 (or 1/7) of the cost; and long-term, such as tiling land, fencing, buildings - these get deducted over 20 years, 1/20th deduction each year.

There are _special_ allowances for the mid & long term deductions to allow you to deduct more the year of purchase, but you need to have the paperwork figured out to make good use of that.

If you do not average a net profit 2 or 3 times out of 5 years, the IRS can question you about being a real business or just a 'hobby' and if they determine you are doing this just for fun, they will not allow you to deduct more than you make. They don't want doctors to hide big incomes behind a losing horse farm hobby, etc. So, keep good records & have a plan on how this will be a real business & is supposed to make you money someday.

Balancing out income & expenses to make the most of taxes is any business' goal, and the same for your small farm enterprise. A good tax CPA that knows farming business can really help you out a lot, & _easily_ make back the $300-500 he costs for his/her services. Plan to buy & sell things when it works out best for taxes, in addition to market conditions.

--->Paul

[ET1 SS]

Originally Posted by fordy

.............the reg's say you should show a profit 2 out of 5 , OR 3 out of 7 consecutive tax years ;

It has been many years since pub 17 said that, it changed long ago.

[caroline00]

we also have a county business license.

[MaineFarmMom]

I'm in Maine. We're required to have a sales tax id number. You can't legally sell as little as a turnip without one.

[Ken Scharabok]

I have a local business license for my eBay stuff but only because they get a bit out of the state sales taxes. I simply walk in with my gross sales and they fill out the form for me and give me next year's license. About $30-40. I figure if I am ever audited the license will help to show I'm really a business.

As noted above, keep ever receipt and your calculations on how you prorated any expenses between business and non-business.

[KIT.S]

In Oregon, there is no sales tax, and no personal property tax on farming equipment - you can check with your state without giving your name, if you want to. Try the website.

Also, QuickBooks computer bookkeeping program is available on their website in a restricted version for free. It only works for 20 customers (make one "Miscellaneous" for those small sales!), but if you use it, you can get a feel for the program. I find that keeping records is one of the most difficult things for farmers - well, for anyone not a bookkeeper! Everyone has the thing they do the best, and paperpushing isn't always that thing! Make it easy and cheaper for yourself and figure out your style of recordkeeping, then keep it up.
Yes, I'm a full time bookkeeper and an as-much-time-as-possible hobby farmer.
Kit