Georgia’s Poultry Industry to Benefit from State Sales Tax Reform
By Mike Giles
“The Department of Revenue’s proposed rule includes a provision that would allow a poultry processor to claim all of the electricity used at a poultry processing plant as tax exempt as long as no more than 10 percent of the energy is used for a non-qualified purpose such as administrative office space.”
A long-time goal of the Georgia Poultry Federation and poultry industry was achieved during the 2012 Georgia General Assembly session — the elimination of the sales tax on energy used in poultry processing. The tax change will make the Georgia poultry industry more competitive with processors in other states and throughout the world by saving the industry many millions of dollars annually.
A number of attempts to reduce or eliminate the sales tax on energy were made over the past decade, but in 2010, the Georgia legislature adopted HB 1405, which established the Special Council on Tax Reform. The mission of the council was to study the state’s revenue structure and make recommendations to the legislature the following year. The Federation and other business groups attended the council’s public hearings and made recommendations through testimony and written comments.
We were pleased when the Special Council recommended to the legislature the elimination of the sales tax on energy used in manufacturing, which would include poultry processing. The next step was to seek approval of this recommendation in the Georgia General Assembly. During the 2011 General Assembly, the tax reform legislation hit a snag in the late days of the session, and the bill had to wait until 2012 for further action.
Good News for Poultry
HB 386 was adopted by the House and Senate and signed by the Governor in 2012. The good news for poultry was that the agriculture section of the bill defined poultry processors as agricultural producers, which meant that 100 percent of the sales tax on energy would be eliminated beginning January 1, 2013, rather than a portion of the tax being eliminated in a phased-in period over four years as is the case for manufacturers. At the Federation’s suggestion, the bill also included a complete elimination of the sales tax on refrigerants used in poultry processing, such as CO2, nitrogen, and ammonia. Energy used at feed mills also qualifies for the exemption. Energy includes electricity, natural gas, or other fuels.
Qualifying for the Exemption
In order to qualify for these new exemptions, a poultry company must obtain a Georgia Agriculture Tax Exemption Certificate (GATE) issued by the Georgia Department of Agriculture. Visit https://forms.agr.georgia.gov/GATE/ to apply or learn more about the GATE program. A company wishing to claim the exemption should provide a copy of its GATE certification to vendors providing the energy or other qualified purchases.
Finalizing the Rule
The Georgia Department of Revenue is required to write a rule implementing the law; however, the department has not finalized the rule even though poultry companies are currently eligible to claim the exemptions. This creates some uncertainty about which purchases are tax exempt and which are not, but it is clear that energy used in poultry processing and at feed mills is now exempt, along with refrigerants used in processing. We are also confident that machinery and equipment used at poultry processing facilities and feed mills are considered exempt. As a manufacturer, poultry processing machinery and equipment needed to be necessary and integral to the process in order to be exempt.
Working with ATRP
The Department of Revenue’s proposed rule includes a provision that would allow a poultry processor to claim all of the electricity used at a poultry processing plant as tax exempt as long as no more than 10 percent of the energy is used for a non-qualified purpose such as administrative office space. The Agricultural Technology Research Program (ATRP) at Georgia Tech has developed a tool that poultry companies can use to determine the percentage of electricity used for these non-qualified purposes. This Energy Calculator is currently being field tested and will soon be available to Federation members.
Mike Giles is president of the Georgia Poultry Federation.