Sale tax for logging company

[Hamacher]

This may be a State specific question but I have a client in Michigan that does tree removal, etc. He was told that he would not be subject to sales tax on his purchases because his business is considered agricultural. Any thoughts?

[Koss]

Sales Tax Exemption

It is definitely state-specific. You gotta check the regs, because it gets really complicated really fast.

West Virginia has something similar. The guidelines published by WV contain a laundry list of purchases that are exempt from sales tax, including:

Purchases by an Exempt Commercial Agricultural Producer--purchases of
tangible personal property or taxable services for use or consumption in the
commercial production of an agricultural product, including the purchase of
fencing and nails used for the construction of fencing, and purchases of
propane for use in heating poultry houses...

The buyer has to give the seller a sales tax exemption certificate.

The Michigan law may not be identical to West Virginia. But your client is not just making stuff up, or repeating what his barber told him. There's something to it.

Your client is in the business of removing trees.

What does he do with the trees that he removes?

He's probably producing mulch.

BMK

[ChEAr$]

But all in all, I don't see a logger being in the agricultural business.
If he owned the trees and raised them, maybe so.

[Jesse]

In Wisconsin our lumberjacks are considered in the business of farming

-Silviculture is the science and practice of renewing a forest crop. Silviculture is to forestry what agriculture is to farming. When a forest stand is harvested it is renewed through silvicultural practices. These practices may include some combination of site preparation, planting, seeding, or tending.

I guess because the loggers are in the business of tending.

In Wisconsin Loggers are not subject to sales tax and are allowed to make purchases for tools such as chainsaws, etc exempt from sales tax. If the business was tree removal for landscaping purposes I would not consider that to be farming.

I'm not sure about MI.

[TaxmannEA]

I was always told that Sch F is used because a logger is in the business of harvesting trees. Farmers harvest grain, etc., loggers harvest wood.

[Gary2]

Regular sales of timber go on Form T. It's a highly specialized area - many preparers have never heard of Form T (and I've never prepared one). I'm not sure how it applies to a logger who harvests trees on land he doesn't own, but a Schedule F would surprise me.