Coalition of groups call for the F.A.C.T.s: Fair Agricultural Chemical Taxes

Tax Reform is needed: states lose $674 million a year to sales tax exemptions for pesticides, fertilizers

by Valerie Frances


riends of the Earth and nine other consumer, farm and environmental groups have called upon officials in 29 states to eliminate exemptions from their state sales taxes for agricultural chemicals such as pesticides and fertilizers. The groups said the $674 million in lost revenue should be used to support family farms, sustainable agriculture, and conservation education.

As economists have long known, we use less of what is taxed and more of what is not. Currently, twenty-nine states exempt agricultural chemicals from sales taxes, amounting to nearly $700 million in uncollected revenue. These tax exemptions implicitly encourage chemically-intensive agriculture and discourage the use of non-chemical alternatives. The exemptions are unfair to people and wildlife experiencing the health consequences of agri-chemical exposure, to other industries that are paying for the costs associated with their environmental and health impacts, and to the taxpayer ultimately footing the bill for environmental cleanup.

The Fair Agri-Chemical Tax (FACT) Campaign - a nationwide alliance of state farm, consumer, and environmental groups - advocates for the repeal of state sales tax exemptions for agricultural chemicals. At the same time, the FACT Campaign supports the return of the sales tax revenue to the farmer through other tax relief, farmland preservation measures, or programs supporting more environmentally friendly farming. In this way, farmers who use chemicals would pay more of their fair share to address the environmental and health impacts associated with use of agri-chemicals but they would receive support for transitioning to more sustainable farming practices.


State sales tax revenue loss


The report shows that 29 of 50 states exempt agricultural chemicals from state sales taxes, resulting in an annual loss of $674 million in revenue. The ten states losing the most revenue are Minnesota ($65 million); Texas ($62 million); Illinois ($59 million); California ($54 million); Florida ($50 million); Indiana ($45 million); Washington ($36 million); Kansas ($36 million); Ohio ($35 million); and Missouri ($27 million). California, Wyoming, and Nevada exempt only fertilizers from sales tax while Nebraska exempts only pesticides. A complete table of sales tax revenue losses in the twenty-nine states, including a breakdown by pesticide and fertilizer sales, is part of the complete report.

"State governments should not be subsidizing the use of poisons and pollution in agriculture," said Larry Bohlen, Director of Health and Environment Programs at Friends of the Earth. "If state officials want tax breaks for farmers, there are better ways than subsidizing pollution."


Incentives for sustainable agriculture

  The objective of this report's recommendations is not to penalize farmers, but to shift funds to encourage more sustainable agriculture. The tax revenue collected should be directly applied to benefit farmers whose practices protect the environment. Our aim is to encourage and support the trend towards environmentally friendly farming practices - practices that in numerous studies are proving to be more economically beneficial than agri-chemical dependence. Eliminating sales tax exemptions does not threaten the farmer using agri-chemicals. Farmers can successfully reduce their chemical use to offset the costs of the sales tax as shown by nearly twenty years of literature comparing conventional and alternative farming systems.


Current unsustainable practices


The report highlights health and environmental problems caused by overreliance on pesticides and fertilizers in agriculture. For instance, in Dane County, Wisconsin, over 1/3 of rural well water is contaminated with nitrates, making it unsafe for infants to drink. Nationwide, health and environmental costs as a consequence of pesticide use alone are estimated to be about $8 billion per year.

"More and more Americans are asking for food free from chemicals and genetic manipulation. Government should change with the times, not stand in the way of a healthier food supply," said Larry Bohlen.

The report suggests a wide range of options for state officials to tailor sales tax revenue to their state's needs. Funding could be used, for instance, to help farmers make the transition away from chemically-intensive practices, to clean up contaminated sites, or for tax relief promoting farming but not heavy use of chemicals.

The "Fair Agricultural Chemical Taxes" (FACT) report is available on the web at

Profiles of agriculture and its impacts on health and the environment in each of the twenty-nine states that exempt agri-chemicals from sales tax are available from Friends of the Earth upon request. They are also posted on the Friends of the Earth website at Copies of the report are available to the public for $10 each to cover postage and printing. Please call Friends of the Earth at (202) 783-7400 and ask for the Publications Office.

  Valerie Frances, Fair Agri-Chemical Tax Campaign, Friends of the Earth, 1025 Vermont Ave., NW Third Floor, Washington, DC 20005; (202) 783-7400 ext 258; Fax: (202) 783-0444