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Published April 05, 2010, 09:07 AM

Colorado law makes farmer pay taxes on tractor he considers farm equipment

GRAND JUNCTION, Colo. — Jerry Derby purchased his 1997 John Deere tractor with the idea he would use it most of the time to plow his field, dig ditches and spray noxious weeds on his 7-acre Redlands, Colo., property.

By: Mike Wiggins, Grand Junction (Colo.) Daily Sentinel

GRAND JUNCTION, Colo. — Jerry Derby purchased his 1997 John Deere tractor with the idea he would use it most of the time to plow his field, dig ditches and spray noxious weeds on his 7-acre Redlands, Colo., property.

As such, Colorado state law considers it a piece of farm equipment and says it doesn’t have to be licensed and registered with the state.

But when Derby loaded the tractor onto a trailer last fall, hauled it up to a Western-wear business he was preparing to open and used it to move some boulders for landscaping, the state’s Department of Revenue considered it a piece of construction equipment, which is subject to state tax.

As a result, he had to fork out nearly $1,000 to license and register his tractor.

An ensuing debate over how Derby’s tractor should be classified — and what appears to be an instance of Department of Revenue regulations trumping state law — has prompted a local legislator to introduce legislation intended to clear up the issue. And miffed county commissioners have thrown their support behind Derby, who plans to seek a refund on the tax.

Laws at odds

Without changes to state law, the 67-year-old Derby says he is concerned every farmer and rancher could be forced to pay tax on their equipment if they venture off their property with it for some reason other than farming and ranching.

“This isn’t just for Jerry Derby,” he says. “It’s for every person who owns a tractor in Colorado.”

Derby hadn’t run into any problems with his tractor in the four years he has owned it until last October, when county motor-vehicle compliance officer Melinda Henderson found it at the construction site of Rocky Mountain Hats & Boots. Henderson routinely visits construction sites around the county to ensure equipment known as special mobile machinery, or SMM, is registered in accordance with state law.

Henderson issued Derby a notice of noncompliance, compelling him to write a check for $968 to register and obtain license plates for it.

Derby, however, disputes the state’s conclusion that the tractor is SMM equipment. Beyond moving boulders at his business before it opened, he says he uses the tractor for nonagricultural purposes “once in a while,” including clearing snow from his elderly neighbor’s property. Otherwise, he says, the tractor stays on his Redlands property “99.9 percent” of the time.

Details, details

State law would seem to favor Derby, as it indicates farm tractors used “primarily” for agricultural purposes are exempt from taxation. But the state Department of Revenue’s regulations differ from state law. They mandate that registration isn’t required on tractors used “exclusively” for agricultural operations.

County commissioners assailed the Department of Revenue’s stance on the matter and have told Derby they would write a letter supporting his appeal.

“The bureaucrats at the Department of

Revenue are not above the law, and their

regulations should not trump the law,” Commissioner Janet Rowland says. “This kind of garbage is the stuff of revolts.”

County Clerk and Recorder Janice Rich, whose department oversees motor vehicle registration, says the Department of Revenue directed county clerks and recorders across the state to enforce SMM registration laws three years ago. She says while she and her employees merely are acting on the directives of the state, she thinks there are discrepancies between the law and the Department of Revenue’s rules.

“This is not something I agree with,” Rich says, adding she and her staff have offered to help Derby with his appeal.

Department of Revenue spokesman Mark Couch says he can’t talk specifically about Derby’s case. But he says in evaluating whether a tractor qualifies as a farm vehicle and is therefore exempt from taxation,

officials look at who is listed as the owner of the vehicle and whether the property where the vehicle is being used is zoned agricultural.

Derby’s tractor is registered under both

his name and Grand Junction Western Wear, the company name he has used for years for

various business ventures, including Rocky

Mountain Hats and Boots.

Derby claims the state and county erred

in listing Grand Junction Western Wear as

the owner, noting the bill of sale for the

tractor is listed in his personal name and

that he paid for the tractor with a personal check.

Legislative bill

The debate over the use and registration

of SMM and farm equipment has reached

the state Legislature, where Rep. Laura Bradford, R-Collbran, is sponsoring a bill that attempts to more clearly define SMM equipment.

“It’s a cleanup that has been needed for years,” Bradford says.

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