In Reichenbach v. Testa (Jun. 28, 2013), the Ohio Board of Tax Appeals considered the appeal of a Farmer who was assessed use tax relating to his purchase of a tractor and backhoe in March 2007.  Upon purchasing the equipment, the Farmer provided an exemption certificate to the vendor on grounds the equipment would be used in farming.  The Department of Taxation, however, found that Farmer was not engaged in farming at the time of the purchase.  In affirming the assessment, the Tax Commissioner primarily looked to the Farmer’s 2007 I.R.S. Federal 1040 Schedule F (Profit or Loss from Farming).  This form listed no farm income and only limited farm expenses.

Farmer explained that he moved to Ohio from New Jersey in August 2007, after his home in New Jersey had sold.  At that time, it was too late to cut hay “because the quality was bad.”  Slip op. at 3.  But he did mow his fields twice in preparation for hay farming in 2008.  Thus, he didn’t generate any profits from hay farming in 2007.

The Board found that Farmer did, in fact, engage in farming as a business.  Even though he couldn’t immediately produce hay, “his preparation and maintenance of the fields that would produce the hay in 2008 constituted the business of farming in 2007.”  Slip op. at 4.  In reaching its decision, the Board was persuaded in part by the Farmer’s “credible testimony.”  Slip op. at 4.