NEWS for North Dakotans
Agriculture Communication, North Dakota State University
7 Morrill Hall, Fargo, ND 58105-5665

April 22, 1999

N.D. Farmers Getting Short-Term Sales Tax Relief

North Dakota lawmakers have passed a bill dropping the sales tax percentage for farm parts and used machinery. The new law goes into effect May 1 and is currently scheduled to sunset June 30, 2001, says an agricultural economist with North Dakota State University.

"This legislation cuts the sales tax rate from the current 3 percent to 1.5 percent during the two-year period the law will be in effect," explains Ron Haugen, extension farm economist at NDSU. "But this law applies only to the purchase of used farm machinery and parts. The tax on new machinery purchases remains at 3 percent."

According to North Dakota tax department estimates, the tax cut will reduce state revenues by about $5.3 million for the term of the reduction, Haugen says.

On an individual basis, Haugen says the tax savings will be small. For example, a North Dakota producer purchasing $10,000 worth of used machinery would realize a tax savings of $150, or spending $1,000 on parts would generate a tax savings of $15.

By comparison, Minnesota has no tax on farm parts and a 2.5-percent tax on farm machinery (new and used). Haugen says South Dakota has a 3-percent tax on farm machinery (new and used) and a 4-percent tax on farm parts. Montana has no sales tax on farm machinery or farm parts.

Besides providing some financial relief for farmers during these times of depressed commodity prices, the North Dakota law could also assist farm implement dealers and farm equipment manufacturers experiencing slumping sales, Haugen says. He concludes, "There is hope that during the next legislative session this reduced tax rate may be extended, or perhaps the sales tax on farm machinery and parts may be eliminated."

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Source: Ron Haugen (701) 231-8103

Editor: Dean Hulse (701) 231-6136