Some farmers assert that South Carolina’s sales tax for agriculture is often the only profit margin that some farmers maintain.
Richard Doran is the owner-operator of Bush River Farms in Newberry, a dairy farm which also has a beef operation.
He was among those who addressed the South Carolina Tax Realignment Commission (TRAC) Thursday. As the commission reviews the state’s tax structure before a possible overhaul by state lawmakers, Doran wants to make sure that agriculture isn’t left behind.
At the very least, Doran wants the state to maintain its current exemptions. “That allows us to not have a sales tax on products that we’re not the end user of,” said Doran. “We do pay sales tax on purchases that we’re the end user of, like paper towels, used in the dairy operation. Some things shouldn’t be considered part of the input cost for producers.”
Doran says losing the agriculture tax exemption would be equivalent to losing 5.1 percent of his gross sales.
Bush River Farms is one of approximately 80 complete dairy operations in South Carolina. The South Carolina Department of Agriculture says most of those operations may be located in the Newberry, Laurens and Saluda areas. The USDA indicates that up to 200 South Carolina farms have some dairy cows. According to 2006 figures, more than 18,000 diary cows in the state produced more than 290 million pounds of milk annually. Edgefield County is listed as the diary region with the most productive milk cows.
Doran says the recession has been a dangerous time for diary farmers. “In the dairy industry right now, to be completely honest,” says Doran, “there has been no profit margin for the last 11 months or so. Taking the tax exemption away could be the point at which some dairy operators cease to operate. And it’s tough across the country. But the exemption is one of the things that South Carolina does that helps the propagation of agriculture, and we do compete in the world market.”
Doran says the state’s existing tax exemption is particularly important when it comes to the resale of dairy cattle. “Depending on what position you take in the cattle market, a calf may be born and moved to another operation, then sold to someone as a young hefer or a bred hefer, then again to someone who will use the animal in milk production or in beef production and in the end that animal may be sold when she’s no longer economically efficient on that farm, so she could be sales taxed four times before she ever gets to the market place.”
Ag officials say that problem is compounded when farmers have to sell off stock in tight times which they would not normally sell.