3.11.2016 – Treated Articles, On-Farm Slaughter, and Sales Tax Discussion
This week, all committees have been working very hard to get bills out of committee due to the crossover deadline. Crossover is the date by which all bills must be out of their policy committees in order to be considered by the other body, in our case, the Senate. If a bill doesn’t make it out in time, a crossover exemption may be requested but that does not guarantee that it will be considered.
The House Agriculture and Forest Products Committee voted out three bills: One extends the sunset for on-farm slaughter provisions; one clarifies what should be exempt from sales and use tax in the agriculture world, and another gives the Agency of Agriculture, Food, and Markets (AAFM), regulatory authority over “treated articles”.
A month ago, as we were taking testimony on H.579, the bill that creates a Pollinator Protection Committee, the subject of “treated articles” came up. That was a term that most of us on the committee had not heard. Treated articles are things that have been treated with pesticide. They can be a variety of things including telephone poles, clothing that is treated with pyrethrins, and pressure-treated lumber. It can also be corn or soybean seed that has been treated with a seed coating.
What we found interesting is that even though the AAFM has regulatory authority over all pesticides being used in the state, they do not have authority over items that come into the State treated with the very same pesticides. It was also interesting to hear that treated articles are not regulated on a federal level either so if a problem arises, there is no clear recourse.
This has been an issue in the recent past when utility poles bled the substance they were treated with, pentachlorophenol (penta), into the ground water, contaminating a shallow, domestic water source. Fortunately, the utility was extremely cooperative and helped to remedy the situation. Had they not been cooperative, there wouldn’t have been much that could have been done.
It is very clear that the AAFM does not want to be in the habit of inspecting these products, but if a situation arises where any product is a threat to health or the environment, the AAFM will have the authority to regulate and restrict its use.
One of the fears expressed by a committee member was that this would be the camel’s nose under the tent toward the banning of neonicotinoids. This is highly unlikely because a ban on neonics would cause farmers to resort to older classes of pesticides known as organophosphates, which are considerably more harmful to mammals.
Depending on the report of the Pollinator Protection Committee (if the Senate passes it and the governor signs it), there may be a recommendation regarding the use of neonicotinoid-treated seed in Vermont but an outright ban would be unlikely.
The on-farm slaughter bill from 2013 allows people to buy an animal directly from a farmer and either slaughter it themselves or hire an itinerant slaughterer to do so right there on the farm. Originally, this was meant to eliminate the requirement for folks to purchase the animal at the farm and bring it back to their urban/suburban homes to slaughter it, in some cases horrifying their neighbors. The on-farm slaughter provision especially helps some of our newer citizens whose cultural and religious traditions involve different dietary requirements.
Our action this year would extend the sunset for another three years. One concern of the AAFM is that over the last three years they have not received as many of the required reports that are due from the farmers selling the animals as might have been expected. Rural Vermont, a nonprofit farm advocacy group that represents those who are opposed to corporate industrial agriculture, has said they would redouble their efforts to get farmers to comply with this requirement. It is also possible that facilities like the Pine Island Cooperative in Colchester have helped meet the needs by providing animals and a custom slaughter facility on-site.
The discussion we have been having for two years regarding sales tax for agricultural items stemmed from complaints from retailers who have been audited by the Tax Department. Several years ago, the Legislature tasked the Tax Department with taking a closer look at whether people/businesses were complying with the law but what we were hearing did not, in some cases, make sense.
What we discovered was that the Tax Department was applying manufacturing standards to agricultural businesses, which was not a good fit. After our discussion last year, the Tax Department worked with the AAFM and actually went on two farm visits to learn more about agricultural issues.
We discovered that the manufacturing principal of “direct and exclusive use” of equipment for agricultural production doesn’t apply well. For instance, for dairy farms anything used for the direct production of milk, like milking machines, was tax free but items like fence posts and fencing to keep animals contained were taxable.
Our work on this issue has gone a long way in clarifying the difference been manufacturing and agricultural production and what should be taxed and what shouldn’t.
We are very grateful to Tax Commissioner, Mary Peterson, and the employees at the Tax Department for their cooperation, willingness to understand, and sense of humor as we worked our way through this. Our bill changes the words “direct and indirect” to “predominantly” and provides the Tax Department with a comprehensive list of things we believe should be tax exempt. Our work also covered diversified farming and greenhouses and will, hopefully, clear up confusion that seems to exist statewide as to what is taxable and what is exempt.
Our expectation is that we will be on the Floor of the House long hours for the next couple of weeks as we move these bills and many others through the process.