Fred Hawk, store manager at RDO Equipment Co. in Imperial, agrees the area's farm economy has been tough over the last three years.
Prices for machinery, parts, fuel and energy have all increased dramatically, while prices received from produce are the same or lower than five years ago, squeezing profit margins to nothing, he said.
Hawk said the tax break is welcome but there is confusion among those who thought the tax repeal was a complete elimination of the sales tax.
"There's still a county and local tax. Only 4.75 of 7.5 percent is being repealed," said George Mainas, a certified public accountant and owner of Mainas Farms in Holtville.
There had been some information in the news that led people to think it was a complete repeal of the sales tax, but only the state portion is repealed, Mainas said.
He said he owns several tractors and spends about $100,000 to $125,000 a year on repair parts for the vehicles. Based on that estimate, the tax repeal will save him $4,750 to $5,937 a year on repair parts.
Mainas added the sales tax repeal has put California on a level playing field with the rest of the country.
Before the budget was signed, California was one of four states to charge a full state sales tax on farm equipment. The other three states are Hawaii, Nevada and Washington.
"It kind of varies from state to state. Some states, like Arizona, have no tax on new equipment but do tax used equipment and parts," Hawk said. "California was one of the last to hold on to the sales tax. Now California is doing a little better than Arizona."
The savings had been significant enough that a few years ago farmers from California crossed the border to Arizona to buy new equipment, he said.
Hawk said there is relief in sight for the farm economy. There are a few crops that may offer more return for farmers. Alfalfa prices are improving and the value of Bermuda seed and hay is holding steady.
Hawk added the prices of leases of land has declined because people are not likely to expand their businesses in a tight economy. With the lack of demand, prices have dropped.
Complete information on the farm equipment sales tax exemption is online at http://www.boe.ca.gov/sutax/exemptfem.htm
Staff Writer Laura Mitchell can be reached at 377-3452 or via email at firstname.lastname@example.org