What do a Canadian corn farmer, a Miami equipment wholesaler and a North Carolina alpaca rancher have in common?
None pay sales taxes on agricultural goods bought in Georgia.
About 1,200 out-of-state individuals or businesses use Georgia Agricultural Tax Exemption cards, which exempt holders from paying the 7 percent sales tax on feed, seed, tractors, plywood and dozens of other products.
Overall, about 33,000 GATE cards have been issued in state and out of state. The General Assembly approved the tax breaks two years ago in hopes of growing jobs and businesses. Many Georgia retailers say their sales have gone up.
But state and local taxpayers have taken a hit. Rural communities, in particular, lose millions of dollars, according to an Atlanta Journal-Constitution analysis.
There’s no evidence the tax exemptions have boosted the economy - the state hasn’t done an analysis. And agencies exercise little oversight to ensure the program isn’t being abused. Only 28 of 33,000 applicants have been rejected since the program began in January 2013.
The state auditor's office predicted the tax break would cost taxpayers $72 million — $42 million for the state, $30 million for counties — during the program's first three years. Critics put the cost at substantially higher.
Then there’s the question of who benefits. Agricultural giants like Weyerhauser, Perdue Farms and Pilgrim’s Pride, all headquartered outside Georgia but with operations here, use the cards to avoid sales taxes here. So do real-estate investment firms, a dozen state legislators and Fulton County tax commissioner Arthur Ferdinand.
Meanwhile, agricultural communities across Georgia suffer from the lost revenue. Valdosta, Pelham and others, faced with millions of dollars of lost sales taxes, have raised property taxes to balance budgets, keep schools open and police on patrol.
“How is it that you can use your GATE card to exempt taxes on horse feed, but if you go to the Piggly Wiggly, Harvey’s Supermarket or the Dollar Store in Mitchell County you have to pay the sales tax on your food?” asked Floyd Fort, superintendent of Pelham City Schools. “I don’t think that’s right, especially in communities with such high levels of poverty.”
Gov. Nathan Deal said he is not opposed to revisiting the exemptions.
“One of the cautions issued early on, when we decided to go forward with the cards, was to make sure they were used for the purposes for which they were intended,” Deal said in an interview.
‘Folks would get upset’
Anne Stone owns Touch of Heaven Alpacas in Warne, N.C., “a stone’s throw from the Georgia line.” She breeds and sells the llama-like critters on 10 acres of Smoky Mountain farmland. She buys their feed, fertilizer, lime and other farm necessities at stores in Hiawassee, Blairsville and Young Harris, Ga.
“I do appreciate them allowing me to utilize the GATE card in Georgia. For us farmers, every little penny we can save is great,” Stone said. “I can see where folks would get upset just coming across the line and not paying taxes. But when I shop at Walmart (in Georgia), I pay their sales tax.”
Georgia legislators passed major tax reform two years ago intended to attract investment, create jobs and streamline the state’s tax code.
The sales tax break for agricultural supplies, a part of the package, hit rural Georgia governments harder than urban Georgia. Rural counties raise most of their revenue from sales and property taxes. Georgia’s 7 percent sales tax — four pennies for state coffers, up to three pennies for counties — is no longer collected on dozens of agricultural products.
Still, urban Fulton County counts 252 GATE card holders, including tax commissioner Ferdinand, who didn’t return calls for comment. Many Atlanta-area card holders are corporations which pay other taxes.
While the problem is most acute in rural Georgia, the impact is felt statewide. Rural Georgians move to metro Atlanta in search of work, stressing the region’s police, roads and social-service networks. And taxpayers in urban counties may have to pick up a larger share of the state’s education tab if their less-fortunate neighbors struggle to cover books and buses.
The wallet-sized GATE cards are easy to get: an online application runs $20 a year. “Qualified agricultural producers” who earn at least $2,500 a year farming or in an agriculturally related business, are eligible. That’s just about anybody who comes in contact with a chicken, log or soybean.
If you sell a cotton seed, for example, or grow, bale, warehouse or ship cotton, you can get a card. Tractor parts are exempt from the sales tax, as are motor oil, chicken medicine, cattle fences, chainsaws and off-road vehicles as long as they’re used on the farm.
Georgia’s cities, counties and school boards received $190 million less in all sales tax revenue in 2013 than they did in 2012, according to the state Department of Revenue. Local officials in Southwest Georgia, where cotton and peanuts are king, attribute much of the drop-off to the agricultural tax breaks.
Lowndes County, along the Florida line, lost $2.3 million in sales tax receipts between 2012 and 2013, according to state revenue records. Valdosta, the county seat, raised property taxes in June for the first time in 22 years.
Tifton and Moultrie, nearby farming communities, also raised taxes on homeowners to make up for the sales tax shortfall. Pelham, near Albany, has suffered a 25 percent decline in sales tax revenues designated for schools and construction projects.
Canadian sweet corn
Non-Georgians hold 1,191 GATE certificates. Florida individuals or businesses account for nearly 500 cards. Alabamians possess almost 200.
Card holders, according to the list addresses obtained by the AJC, live well beyond neighboring states, too. A sweet corn producer in Ontario, Canada, owns a card. Rouge River Farms also grows corn in Climax, Ga.
“The program should be for Georgians,” said Michael McPherson of the Georgia Municipal Association, which represents local governments. “If a Georgian was to receive a similar benefit from another state, that would be understandable. But they aren’t. And the out-of-staters aren’t contributing to local communities either.”
Card holders aren’t required to operate in Georgia. In fact, most out-of-staters, like Chris Anckersen, don’t. He breeds and trains Arabian horses in Long Creek, S.C., and shops for feed in Clayton, Ga., 13 miles away.
“Some tax money is probably lost, but we’re spending money and helping the economy anyway,” Anckersen said. “We’re still buying other products, like dog food and wood shavings.”
House Majority Leader Larry O’Neal says the comprehensive tax cut package has helped Georgia add tens of thousands of jobs by allowing businesses to invest more and hire more workers. Seed, feed and farm equipment stores love the tax break because it boosts sales and draws out-of-state customers.
Yet no GATE card audit has been completed. No agency can say how many sales tax dollars have or haven’t been collected.
The Department of Revenue received $174,000 this year to audit the program and will hire two inspectors Nov. 1 — nearly two years after the cards went into effect.
“We need more controls to make sure it’s doing what it’s intended to do,” said Larry Hanson, the city manager for Valdosta. “Why should agricultural businesses in another state get the benefit? If they examined and tightened (the program) we all would be better for it.”
About the Author
