Farmers Markets and Tax Collection

Cross-posted from the Vermillion Area Farmers Market site.

With the market season ramping up (just a little over a week to go before the VAFM opening market!), I thought I’d get out a post on tax collection at farmers markets in South Dakota.

[Disclaimer!] Of course, I don’t work for the Department of Revenue, and I’m not a tax professional, so back up everything I say here with some calls and contacts of your own.  I’ve been really happy with the help I’ve gotten from Laura Cunningham in the Yankton office.

But I have been doing this farmers market thing for some time–both as a board member of a market and a vendor.  And I’ve been in contact with the Department of Revenue about market-related issues on numerous occasions, so I’ll tell you what I’ve learned.

First of all, vendors at regularly-scheduled farmers markets in regular locations do NOT have to pay a special event or tourism tax on goods they sell there.  Craft shows and flea markets and other non-regularly scheduled events, yes.  Farmers markets, no.

This may make reporting a little tricky for vendors who do both kinds of events, but just keep the regularly-scheduled, regular location thing in mind, and of course, call the Dept. of Revenue for back-up.

What can make this issue confusing for market managers and boards is that every year, the Dept. of Revenue sends out a letter, a list to fill out with the names of vendors, and a sheaf “Special Event” tax forms for vendors.

At the end of each season, farmers markets are required to provide the Dept. of Revenue with a list of all the vendors who sold at their market.  This is actually kind of useful, because the market manager or board can simply make a copy of that list to use for their own records (and for sending out info to vendors) without having to go through a huge stack of contracts.

But the “Special Event” tax forms can make vendors think they have to pay a “special events” or tourism tax for sales at that market, and they don’t.  We actually don’t end up using many of those forms because most of our vendors already have a sales tax license, and they file twice yearly–there’s no reason for them to fill out another form.

The forms are mostly for those vendors who are from out of town and may not know our tax rate, or for those who don’t have a sales tax license yet.  We do let vendors know that regardless of their preferred method of filing, their names are going to be reported, and if they don’t pay, they’ll be hearing from the tax woman.

Another issue that markets sometimes have trouble figuring out is whether or not they must pay taxes on vendor dues–if the market itself should have a sales tax license, even though they don’t really “sell” anything.  In our case, the answer is no.

From my understanding, this has to do with our status as a non-profit corporation.  We are simply collecting vendor dues into a pool that can be used for promotion, insurance, and other necessities.

We were actually advised against applying for a sales tax license by the Dept. of Revenue because then it’d look like we were intending to sell something, and we’d have to file twice a year even though we’d have nothing to report.

A couple final issues in regard to sales tax at farmers markets in South Dakota (which right now only applies to our market, but hopefully will apply to others soon): it is against the law to charge sales tax on EBT or food stamp purchases.

If your market decides to go with a collective EBT and/or debit program with the market bank account receiving the funds from electronic transfers to be reimbursed to the vendors who have made those sales, make sure to keep very good records on the money that comes in from those transactions and the money that goes back out in vendor reimbursements–otherwise it could look like your market is making sales instead of simply facilitating them.

Once again, make sure to back up the information provided here with a call to the Dept. of Revenue to make sure it’s accurate for your market and/or your vending situation.

And have a great market season!


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