Arkansas has 46,500 farms covering 14.3 million acres, according to the Department of Agriculture's 2007 survey of state farming. Arkansas tax laws have evolved in recent years to recognize the importance of local farms to the state economy. Tax codes dictating valuation, crop assessment and sales taxes have become hot-button issues in Arkansas over the last few decades. A general understanding of tax laws applicable to Arkansas can help farmers and local residents understand these debates.
County appraisers are sent each year to assess the value of agricultural land throughout Arkansas. These appraisers look at the productivity of each acre of land and the likeliest crop grown on this land to determine its value for tax purposes. The land valuation process is based on a uniform set of values created by the state Assessment Coordination Department that ensure similar property sizes and uses are taxed at comparable rates. The valuation tables created by the state are based on geographical distinctions generated by the U.S. Forestry Service to separate soil types. After the appraisal process is complete, the county and the state are able to levy accurate property taxes on farmers.
The state of Arkansas levies an assessment tax on various crops and farm products to offset inspection costs. The state's campaign against brucellosis, a cattle disease that can spread to milk and farm products, is funded by a $1 assessment on each head of cattle sold within Arkansas. The wheat assessment of $0.005 per bushel is used to ensure that Arkansas wheat is properly weighed and inspected for crop diseases. A similar fee is levied on each bushel of corn and sorghum, with the state collecting $0.01 per bushel at the end of the year.
Sales Tax Exemption
The Arkansas Farm Bureau promotes the state's sales tax exemption for small farmers. This tax exemption is determined by looking at the farmer's home county, the crop or farm asset in question and the total sales of crops within the state of Arkansas. For example, a farmer in Arkansas County who sells 1,000 units of corn can expect to pay sales taxes up to $3,580 with a $16,298 sales tax exemption. This sizable exemption includes local, county and state sales taxes that can act as barriers to entry for family farmers without significant assets.
Sales Taxes at Farmers Markets
While a sales tax exemption is given to farmers for products sold from their farms, this rule is not applied to farmers markets and roadside sales. State officials require farmers to send in local, county and state sales taxes at the end of each year according to their sales from these small-scale events. This requirement comes from the determination that Arkansas farms are "established businesses" akin to shops and retailers that must also pay sales taxes. County officials have enforced sales tax requirements unevenly due to the difficulty in keeping proper records for impromptu events like roadside sales. This lack of consistent enforcement has frustrated farmers, who are unsure if they will need to pay sales taxes after each season.
Read More: Arkansas Food Tax vs Sales Tax
Farm Utility Taxes
Arkansas farmers are required to pay a sales tax on utilities due to the high demand for gasoline, electricity and natural gas on farms. This tax is tied to the amount of energy used by a farm as well as the average price of utility usage in the farmer's county. The advent of mechanical milking, motorized grain elevators and other modern farming tools has contributed to skyrocketing farm utility costs.
Nicholas Katers has been a freelance writer since 2006. He teaches American history at Carroll University in Waukesha, Wis. His past works include articles for "CCN Magazine," "The History Teacher" and "The Internationalist" magazine. Katers holds a bachelor's degree and a master's degree in American history from University of Wisconsin-Green Bay and University of Wisconsin-Milwaukee, respectively.