Are you aware that, as a Missouri farmer, you could take advantage of a provision in our tax law that allows you to purchase your farm vehicles and trailers without paying sales tax? Section 144.025 of the Missouri Tax Code states that “any purchaser of a motor vehicle or trailer used for agricultural use… shall be allowed to use an allowance to offset the sales tax liability towards the purchase of the motor vehicle or trailer any grain or livestock produced or raised by the producer.”
To state that more plainly, the Department of Revenue will allow you to forgo paying sales tax on vehicle purchases if you trade grain or livestock to the vehicle dealer in exchange for your agricultural-use vehicle, instead of simply writing a check or taking a loan. To take advantage of these sales tax savings, simply follow these rules:
• Make sure the grain or livestock is traded to the dealer within one week of the purchase date of the vehicle.
• Make sure that the vehicle is used for agricultural purposes.
• Make sure that the livestock or grain being traded was raised or produced by your farm operation.
• Prepare and submit Form 4606: Bill of Transfer to the Department of Revenue, to certify that all of the above criteria have been met.
• If the commodity being traded is grain, and the grain is stored in an elevator, attach a receipt to Form 4606 that confirms the dealership’s title to the grain. The Department of Revenue states that a check made payable directly to the dealership from the grain company is not acceptable without a receipt that shows the ownership of the grain is being transferred to the dealership.
It’s important to note that when you carry out a transaction like this, you will effectively be selling grain in an amount equal to the fair market value of the farm vehicle – so if you trade grain or livestock for a $50,000 truck, you will need to claim $50,000 of farm income on your tax return. You will also then include the $50,000 vehicle among your farm assets, to be depreciated appropriately on your tax return.
If you consider performing a trade like this, it’s important to discuss it with your vehicle dealership to make sure they are willing to accommodate it. It’s also a good idea to work proactively with your tax advisor, who can help make sure that each qualification is appropriately met.
For more information on trading commodities for farm vehicles, visit dor.mo.gov and search Form 4606.
