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  1. #1
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    Jun. 28, 2012
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    Default could my barn be tax exempt in Pa?

    I'm trying to Google tax exempt status requirements for Pennsylvania but all I seem to be getting is about 501c3 orgs. It's very early yet to call anyone so I figured I would see if anyone would know what the requirements are here in Pa.



  2. #2
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    Apr. 16, 2007
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    Downingtown, PA
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    If you are only a boarding business then no you will not be tax exempt. Horses are not considered agriculture (who knew?).
    You will however, be able to deduct all of your business expenses.

    Good luck.



  3. #3
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    Feb. 6, 2003
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    What type of tax are you attempting to be exempt from ?

    PA Sales Tax Exemptions; http://www.pacode.com/secure/data/06...chap32toc.html
    Last edited by Equibrit; Sep. 12, 2013 at 10:45 AM.
    ... _. ._ .._. .._



  4. #4
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    Jan. 26, 2006
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    Quote Originally Posted by QM2 View Post
    If you are only a boarding business then no you will not be tax exempt. Horses are not considered agriculture (who knew?).
    You will however, be able to deduct all of your business expenses.

    Good luck.
    the United States Department of Agriculture considers them livestock as the have them included in National Animal Identification System (NAIS)...most all other government agencies believe horses are pets



  5. #5
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    Jul. 19, 2010
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    Gum Tree PA
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    Quote Originally Posted by QM2 View Post
    If you are only a boarding business then no you will not be tax exempt. Horses are not considered agriculture (who knew?).
    You will however, be able to deduct all of your business expenses.

    Good luck.
    This used to be true but the tax law was changed a few years ago. For profit, professionally run horse boarding operation are now considered agricultural in PA. And enjoy all of the tax exceptions as any other agricultural endeavor.

    Even before the law was changed for the boarding of pleasure horses, sport horses and the training of the breeding of Thoroughbred racehorses by those that board for others and or for themselves as their main occupation and livelihood were considered agricultural. I know because that is what I do for a living. But it can’t be a hobby in the eyes of the tax collector.

    OP are you talking about your barn or your horse business. You can not write of the cost of building a barn in the year it was built. I believe the cost is depreciated over 7 years. Though there were accelerated depreciation tax benefits on capital improvements up to I believe $750,000 if not more in the year built. But I believe that expired last year maybe this year. It was part of the economic stimulus plan. As hard hit as our horse business was we didn’t have the cash to take advantage of it anyway. Contrary to popular believe when you write something off the government does not send you a refund check. You have to have the income to write loses off against.


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  6. #6
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    Default

    No I'm talking about my soon to be established boarding business on the farm that I lease.



  7. #7
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    Quote Originally Posted by Chachie View Post
    No I'm talking about my soon to be established boarding business on the farm that I lease.
    If don’t already have a need for an accountant you will with a horse business. But make sure to find one that already knows the horse business other wise you will be paying for their education. I say this because I am not an accountant but having been in the horse business my whole life I have learned a lot about the business side. That being said an accountant should be able to tell you how to structure your business if not find another one. Most if not all small businesses these days are set up as an LLC. It only cost a few hundred at best and can be done by yourself. I believe all of the forms you need can be found on the PA state government website with instructions and filing fees. If not just use Legal Zoom. It is very simple and cheap. No need to incorporate anymore. Much more complicated and expensive. An LLC provides most if not all of the same benefits and personal protections that a corporate umbrella offers. But you do not have to file 2 separate tax forms and numerous other record keeping and procedures that is required of corporations. An accountant will explain all of this. Once your LLC is established, it takes about a month to get the paper work back from the state, you can then apply for your Federal employer ID number and you state tax except ID number. Which you give to all of your suppliers and don’t have to pay sales tax on feed, supplies, vet, tack, most equipment, capital improvements, etc. Fill out the tax except forms at supply stores you use on a regular bases, Tractor Supply, hardware, Home Depot, fencing suppliers, tack stores, etc. At the end of the year they will either give you and or send you a list everything you bought at years end. Not everything is tax except.
    Horses businesses can be and are a RED flag to the tax collectors. Especially if it is not your principal business and or source of income. Even more so if you show on your income tax forms other large sources of income. Every business should be started with proper research and paper work. A sound and well thought out business plan, a well written and researched Pro forma. If the business should be audited the IRS will expect the business to have all of this on file. A list of expert advisors, used or not, a business accountant and the legal firm you may or may not need the use of. Separate business checking and savings accounts that are only used for the business. Dedicated accounting software and computers etc. All of this goes a long way in showing that you are conducting your business in a professional for profit manner. Even if you miss the 1 in 7 rule.
    Sorry if you know all of this already just thought I would go into greater detail for others who may not.


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  8. #8
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    PA booklet on Tax matters in Agriculture;
    http://www.google.com/url?sa=t&rct=j...1gCFfA08xZUMTg
    Rev 12/12

    WHAT IS FARMING?
    The following activities, when conducted as a regular
    business, are considered farming:

    A. Production of Food Products for Human
    Consumption

    • The production of food crops and breeding and
    raising of livestock, bees and poultry.
    • The production of vegetables, vegetable plants,
    fruits or nursery stock.
    • The propagation of game birds for commercial
    use by holders of propagation permits.
    • The propagation of fish or other aquatic animals
    for commercial use as a food or food by-product.

    B. Production of Nonfood Products
    • The production of flowers, trees (including
    Christmas trees) plants and shrubs in the field,
    nursery or greenhouse.
    • The propagation of furbearing animals (not
    pets).
    • The propagation and raising of horses to be
    used exclusively for commercial racing activities.
    ... _. ._ .._. .._



  9. #9
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    Jan. 24, 2004
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    Sergeantsville, NJ
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    Default

    See more recent commentary by the Pennsylvania Farm Bureau on this topic: http://www.pfb.com/index.php?option=...=37&Itemid=171



  10. #10
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    Quote Originally Posted by JanWeber View Post
    See more recent commentary by the Pennsylvania Farm Bureau on this topic: http://www.pfb.com/index.php?option=...=37&Itemid=171
    Re: Proposed rulemaking to amend 7 Pa. Code Ch. 137b (Preferential Assessment of Farmland and Forest Land under the Clean and Green Act), published in the August 3, 2013 issue of the Pennsylvania Bulletin (43 Pa.B. 4344)

    That is a proposal to include the property of boarding facilities in the state’s farmland preservation program. Nothing to do with tax exemptions.
    ... _. ._ .._. .._



  11. #11
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    Jul. 19, 2010
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    Gum Tree PA
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    A little clarification seems to be needed. The OP asked if her Barn meaning her boarding business could be tax exempt. Now, no businesses other then certified non-profits are exempt from paying income tax. I assumed what the OP was asking is if her/he Boarding business can take advantage of certain tax exemptions which for the most is sales tax for products, services etc used in the course of doing business. Yes, assuming that the property that is being leased is not restricted by zoning. I.E. zoned for horses but not zoned for a horse business, some zoning restricts the number of horses allowed, or any business for that matter. After the business has been set up and federal and state tax ID numbers have been issued the business will be exempt from paying certain taxes. How to form and set up should be discussed with an accountant and or attorney that specializes in such things. Some of the comments seem to be addressing how certain properties are taxed. In other words Property Tax. The OP clarified her question by saying she/he is leasing the property. So how the property is taxed is really not her concern from what she/he has posted. Now, if the owner of the property is trying to change the tax status of their property by having someone run a horse boarding operation is a different story. PA up until a couple of years ago did not recognize any property as agricultural which is taxed at a much lower rate if it was solely being used for pleasure/sport horse boarding and training. That changed. But not for every property owner from what I understand. What properties qualify and what ones don’t needs to be discussed with an accountant, real-estate attorney and or someone at state level.
    What the state is trying to avoid are people buying a McMansion with 10-20 acres which in this area can go for a few millions use or put up a barn, board a couple of horses and have the property reclassified as agricultural which would drop their property tax substantially. Or offer field board or throw a couple of cows or sheep on it. That’s not going to happen. At 110 acres our property was quite expensive by anyone’s standard and if it could not have been classified and taxed as agricultural we could not have bought it. Property tax if pretty high in this state. Agricultural classified property is taxed only on the accessed value of the house, barn and other structures which is fraction of the value of land. Land around here cost $25-50,000 an acre. Be it 1 acre or 500. 25 acre minimum to subdivide and or build on. The breeding, raising and training of Thoroughbred Racehorses was already classified as agricultural before the property tax code was changed.
    As I said in my previous comments anyone going in to any type of business should talk to an accountant and if land is involved consult with a real-state attorney to make sure the property is zoned in a way that conforms with their business.


    2 members found this post helpful.

  12. #12
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    Jun. 28, 2012
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    Default

    Thank you Gumtree. You are correct, I was speaking of being tax exempt in the sense of sales tax and not tax exempt as in income tax. I really appreciate the information you posted as it has given me the direction i needed. In the land of automated voice systems, it is sometimes impossible to get answers when calling the government because tge government thinks that every question can be answered by their automated voice system. {Rolls her eyes}
    I am looking into sales tax exempt status on my own accord. Our leased property is allowed to board at our expense if we want to. It is not a requirement of our lease.
    Thank you again for the information.



  13. #13
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    Sep. 7, 2009
    Location
    Lexington, KY
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    Default

    Quote Originally Posted by clanter View Post
    the United States Department of Agriculture considers them livestock as the have them included in National Animal Identification System (NAIS)...most all other government agencies believe horses are pets
    I assume the OP meant sales tax exempt. Horses are not considered livestock for tax purposes in KY. They are considered companion animals. So in KY as well no tax exemption for horse related businesses.
    "We can judge the heart of a man by his treatment of animals." ~Immanuel Kant



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