Nebraska Farm Machinery Replacement Parts No Longer Subject to State Sales Tax

Nebraska agricultural equipment owners will no longer have to pay state taxes on replacement parts for their machines.
Nebraska agricultural equipment owners will no longer have to pay state taxes on replacement parts for their machines.

As of Oct. 1, Nebraska farmers will not have to pay sales tax on agricultural machinery or equipment replacement parts, a change that is expected to save farmers and ranchers between $9 million and $10 million per year. This comes after a change to Nebraska state law following Nebraska Farm Bureau-supported legislation during the 2014 session of the Nebraska Unicameral.

Agricultural machinery and equipment is defined under the law as tangible personal property that is used directly while harvesting or cultivating a crop, raising or caring for animal life, or collecting or processing an agricultural product on a farm or a ranch. Farmers are not exempt from sales or use taxes on equipment, supplies and services utilized while doing business.

Prior to the change in law, Nebraska was one of eight states that charged sales tax on repair or replacement parts on agricultural machinery or equipment.

“Nebraska Farm Bureau is an advocate for Nebraska’s farm and ranch families and that includes having a daily presence at the State Capitol to represent our members,” said Steve Nelson, president of the Nebraska Farm Bureau. “We are pleased to have worked on behalf of our members to be part of the effort to provide this much needed change in Nebraska tax policy.”

Nelson went onto say that he believes that farmers and ranchers were previously encouraged to cross state lines in order to receive tax breaks. Senator Annette Dubas initially presented the tax law change, and Governor Dave Heineman signed it into law back in April.

Because the law went into effect on Oct. 1, purchases of repair or replacement parts for agricultural machinery and equipment that were made beforehand are not subject to tax exemption.

Some of the items that are now eligible for tax exemptions include hay mowers, hay rakes, plows, and grain spreaders. Irrigation equipment such as well pumps and pipes are also eligible. The Nebraska government website has posted a list of qualifying – as well as non-qualifying – items for farmers and ranchers.