Sales Tax Slice: Sprucing Up Your Home? Some States Exempt Christmas Trees, Others Needle You for Tax

Christmas Tree2If you’re planning on buying a live Christmas tree this year, but haven’t yet done so, it may be more difficult to find your dream tree than it was last year. Apparently, a Christmas tree shortage across the country is driving up prices while lowering supply, according to the Los Angeles Times. Luckily for some would-be purchasers, several states offer tax exemptions on sales of Christmas trees and on certain sales to Christmas tree farmers.

Many states exempt sales of Christmas trees when sold by the farmers who grew them. In Mississippi, sales of Christmas trees are exempt if they are grown in Mississippi and harvested or cut from the place where they are sold. Similarly, Arkansas also exempts receipts from the sale of Christmas trees produced on a farm, if sold directly by the Christmas tree farmer to a consumer. However, if the sale is by an established business located on a farm, then it will become taxable. Arkansas also taxes receipts from sales of other trees.

Conversely, some states, like Washington, explicitly apply sales tax to retail sales of Christmas trees, even by the farmers who grew them.

As an alternative approach, in addition to exempting sales of agricultural products by their producers, Alabama exempts certain sales of Christmas trees by particular organizations from local sales and use taxes. Specifically, Christmas trees sold from the tree lot of the Mobile Optimist Club are exempt from local Mobile taxes. Even if a state does not have an exemption specifically for Christmas trees, many, including Arizona, Illinois, and New York, exempt sales by qualifying nonprofit organizations. This means that Christmas trees sold to raise funds for such charities are exempt regardless of the state’s position on the taxability of the trees themselves.

Many states also offer exemptions on certain sales to Christmas tree farmers. Specifically, Kansas exempts all sales of farm machinery and equipment used in the operation of Christmas tree farming, apart from motor vehicles and farm trailers. In Michigan, individuals who grow Christmas trees may purchase seedlings tax free. Oklahoma, Utah, and Washington state that growing Christmas trees is an activity that qualifies for the states’ sales tax exemptions for agricultural production. Vermont also specifies that, while cutting most trees is not an agricultural production activity, cutting Christmas trees is an agricultural activity. Other states, like Iowa, specify that the cultivation of Christmas trees does not constitute agricultural production and Christmas trees do not qualify as tax exempt plants.

Now that we’ve established how the various states tax Christmas trees and the people who farm them, I just need to figure out how to get on Santa’s Nice List.

Continue the discussion on Bloomberg BNA’s State Tax Group on LinkedIn: Should the states exempt sales of Christmas trees?

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