State auditors ding controls on agriculture tax break

By Maggie Lee

A tax break that’s meant to boost the agriculture business in Georgia is still liable to abuse by folks who aren’t earning all that much money at farming, or stores that want to move merchandise that has nothing to do with producing food, fiber or timber.

That’s according to a new review by state auditors of a tax exemption.

At issue is what’s called a “GATE card.” It stands for Georgia Agricultural Tax Exemption. It gives a sales tax break to people who attest that they earn (or will earn, with slow-growing products like timber) $2,500 yearly from agriculture.

Georgia lawmakers consolidated existing agriculture sales tax exemptions into the GATE program in 2012. File/credit: Maggie Lee

Georgia lawmakers consolidated existing agriculture sales tax exemptions into the GATE program in 2012. File/credit: Maggie Lee

The card entitles the roughly 38,000 holders to a tax exemption on things like fertilizer, seeds and machinery.

The program is tighter than the exemption program that preceded it — which did not even require registration.

Nonetheless, though the state Department of Agriculture has put controls in place on GATE, weaknesses in design and implementation increase the risk of misuse of the exemption, according to a report from the Georgia Department of Audits and Accounts.

There’s been plenty of reporting on GATE abuses — like in early 2015, the WSB-TV producer who bought (and returned) a sales tax-free charcoal grill with a GATE card obtained for a piece of family timber land. Even earlier, the AJC reported on folks trying to get a sales tax break on the likes of funerals and cat food.

Since then, the state has set aside more money for program oversight, doing things like checking on retailers to make sure they’re not giving tax breaks on the likes of charcoal grills. Lawmakers discussed an overhaul in 2016, though no bill passed.

Of 42 GATE audits conducted by the Georgia Department of Revenue between Nov. 2014 and April 2016, a total 29 revealed either ineligible cardholders or ineligible purchases or both, according to the report.

Auditors suggested verifying farmers’ income in some way, perhaps by making applicants submit tax documents or by letting program administrators in the agriculture department see state tax records.

That information-sharing was one of the things the Legislature talked about in 2016.

Auditors also suggested listing things eligible for the tax break on the actual card. Fertilizer, for example, is eligible. Household furniture is not. The Department of Revenue holds retailers accountable for knowing what’s a valid sale.

The Department of Agriculture defended some aspects of its administration in written comments to auditors. But it argued that there are some limits in law and capacity as well: it does not have a mechanism to securely maintain tax documents, it said. Though Agriculture’s written comments also say that changing the law so that Agriculture could see some Department of Revenue taxpayer data would be of benefit.

The state and local governments will forego something like $350 million due to the tax break in the year that ends in June, 2018, according to the latest official state estimate.

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