Illinois Farmers are exempt from paying sales tax on seeds but not for plant starts
In Illinois, farmers do not have to pay sales tax on their seed purchases. However; this same exemption does not apply to starter plants.
Fruit, vegetable, nut, and hemp farmers often must purchase starter plants — small plants that are typically several weeks old, often grown in a greenhouse — in order to have a crop to harvest. But when they purchase starter plants instead of seeds, they face an added sales tax.
Are you a farmer that has paid sales tax on plant starts for fruit and/or nut trees, vegetables, hemp, other? We would love to hear from you!
For some fruit and vegetable farmers, starting a plant from seed versus starter plants can be a daunting venture.
Raising enough seedlings to operate a farm business is in itself, a full-time job– job that many farmers simply do not have the time to devote. Instead, many fruit and vegetables farmers choose to purchase starter plants and rootstock from local nurseries.
In some cases, as with fruit trees, purchasing rootstock is the only option. Fruit trees grown from seed do not reliably produce the same variety of fruit, therefore orchardists must buy rootstock and then graft on the variety they wish to grow.
Illinois farmers are exempt from paying sales tax on seeds so long as they are used solely for production agriculture. However, starter plants, like apple rootstock, nuts trees, and vegetable plugs used by fruit and vegetable farmers across the state, do not fall in that category and are not tax exempt.
Sales tax on starter plants creates a disadvantage for small, diverse, fruit and vegetable operations that are feeding communities, building climate resilience, and are often young and beginning farmers.
In 2015, the Savanna Institute and other Illinois non-profit organizations introduced a legislative amendment to the current Revenue Retailers Occupation Tax that requested to add starter plants to the tax exemption language.
But due to the state budget impasse in 2015, this bill and any other bill that sought to alter the Illinois budget, was shelved.
Illinois could explore introducing the same or similar legislation to even playing the field for farmers across the state.
Are you an Illinois farmer that has paid sales tax on your plant starts?
We are seeking to speak with farmers to learn more about the cost and impact of starter plant sales taxes on your farm.