Expanding Market Access
Should our market accept EBT?
If your community has SNAP-eligible citizens, and your farmers are committed to working with you to become accessible to SNAP shoppers, then YES!, try to get your market equipped with EBT. To learn how, keep reading!
How do we begin accepting SNAP/EBT?
Here is a very basic overview of the process:
1) Submit an online application with Food and Nutrition Services here. If accepted, this will give your market a SNAP retailer license.
2) After completing your application, send the required print documentation to the SNAP Retailer Service Center.
3) Rent, lease, or purchase EBT equipment, known as a POS terminal. In 2012, USDA announced funding to help non-participating farmers markets afford wireless POS terminals; in 2013, eligibility was expanded to include direct marketing farmers as well. Check to see if you are eligible for a FREE terminal from your state. You’ll want to read up on POS terminals, which come in many varieties: wired and wireless; some have the option to accept credit and debit cards. POS terminals can be manned by the market manager or a third party operator, and can be leased for the market season or purchased. There are a number of merchant service providers in the marketplace (FMC does not endorse any particular company). Expect to pay between $400 and $1000 for a terminal, depending on its features, or around $50 for a monthly rental fee (with additional fees for wireless, customer service, setup, and per-transaction). Keep in mind that credit/debit card acceptance will increase overall sales, and that renting a terminal with seasonal account closure will increase monthly costs but will eliminate the problems of owning an obsolete machine and storing the machine. If you are not able to obtain a POS terminal or have an offsite terminal, you can accept manual vouchers. Call your state SNAP helpline to order and redeem vouchers. Read the step-by-step guide to accepting manual vouchers in the two guides linked above.
4) Choose an EBT transaction system. Using a central terminal at the market is usually preferred, as it minimizes costs and enables 100% vendor participation, as each vendor does not have to apply for a SNAP license. You can accept EBT transactions through a token system or a receipt system. See below, What are tokens, and should we use them for EBT at our market? What alternatives are there?, for more information.
5) Train EBT managers. Managers must be able to assist customers, vendors, and volunteers; know how to use and troubleshoot the EBT system; be able to keep records and track sales; and track customer experience and needed changes in the system.
6) Train vendors. Vendors must keep records to make sure they are properly reimbursed; know what can and can’t be sold to SNAP recipients; ensure their staff know the system; and display proper signage.
7) Advertise! Visit local social services offices, schools, daycares, and senior buildings. Make ads for local newspapers. Create banners and flyers. Consider incentive programs, such as the Double Value Coupon Program of the Wholesome Wave Foundation. Throughout this process, take advantage of the many tools and resources available to you online. The Farmers Market Coalition’s resource library has a whole section devoted to EBT. Another must-read is the USDA website, which has a list of grant resources for EBT-using farmers markets, as well as its own step-by-step EBT guide.
- USDA Food and Nutrition Service’s Farmers Market Participation in the Supplemental Nutrition Assistance Program (SNAP)
- Maine Department of Agriculture, Food, and Rural Resources’ Food Stamps and Farmers, It’s a win-win. Toolkit for Accepting Electronic Food Stamps.
- Market Umbrella’s Electronic Benefits Primer: Bridging the Digital Divide, How to Bring Wireless EBT to Your Farmers Market
What strategies can we employ to increase use of nutrition assistance program benefits at the market?
- Advertise that you accept benefits and provide local SNAP and WIC offices with promotional materials.
- Establish partnerships with other community organizations that offer services to nutrition assistance clients and work with them to develop an educational campaign to create a relationship between participants and farmers.
- Offer educational opportunities about the products at the market including nutrition tips and recipe ideas.
- If you have the resources, consider providing transportation such as coordinating a bus from a local senior housing complex so that seniors can redeem their FMNP benefits, or from a convenient location for individuals who receive WIC or SNAP benefits. Market Umbrella was able to increase the number of seniors receiving matching funds from 2008 to 2012 by 501%: read how here.
- Offer incentive or matching programs to increase the purchasing power of program benefits. Many markets have received public and private funding to double the value of participants’ benefits when they use them at farmers markets. One example is The Food Project and the City of Boston’s Boston Bounty Bucks.
There are some great organizations helping farmers markets across the country increase the use of nutrition assistance benefits, including the Wholesome Wave Foundation and the Fair Food Network. The Wholesome Wave Foundation offers funding, grant writing, technical assistance, and community support to participating farmers market in their Double Value Coupon Program. The Fair Food Network is about to embark on a multi-year Double Up Food Bucks program that seeks to change the purchasing habits of thousands of low-income consumers in Detroit.
- USDA Food and Nutrition Service’s Attracting SNAP Customers to Your Farmers Market
- USDA Food and Nutrition Service’s Supplemental Nutrition Assistance Program (SNAP): Putting Healthy Food Within Reach, A State Outreach Toolkit
- USDA’s Agricultural Market Service and the Southeastern Pennsylvania Resource Conservation and Development Council’s Connecting Local Farmers with Farmers Market Nutrition Program Participants
What are tokens, and should we use them for EBT at our market? What alternatives are there?
Here is how it works: a customer purchases market tokens from the central EBT location (often at the market’s information table) using their debit, credit, or EBT card, and then uses the tokens to purchase products from participating vendors. The vendors exchange the tokens back to the market according to an agreed-upon reimbursement schedule. The market keeps track of token sales vs. token redemption to ensure that the system is functioning properly. A market can also use paper scrip instead of tokens, which tends to be less bulky, but they are also more easily counterfeited. For a list of places that you can purchase paper scrip or tokens and for even more information, take a look at SNAP at Farmers Markets: A How-To Handbook.
An alternative to tokens or scrip is a receipt system. With this system, the cardholder brings the produce she wishes to purchase to the vendor, who sets it aside and hands the cardholder a receipt stating the vendor name, amount purchased, and items purchased. The customer then brings this slip to the central POS, where her card is swiped. The machine prints out a receipt, which the customer returns to the vendor to receive the produce. The vendor is then reimbursed by the market according to an agreed upon payment schedule. The advantages of the receipt system are that it has an extensive paper trail; it’s cost-efficient; there is nothing of value, like tokens, to be lost; and purchases can be precisely calculated down to the last penny (token systems usually just use dollar tokens). On the other hand, tokens have the advantage of being able to be purchased and held onto for later use or as a gift; they can be used as a marketing tool; they’re familiar and easy for customers to understand; and they attract credit/debit customers as well. Here are more great resources for using tokens at your market:
For ways to communicate about your token system, look at Portland Farmers Market’s Tokens 101 for Shoppers.
For token system logistics, see Market Umbrella’s You Tube Video, FAQ Token Systems Marketshare.
Other Resources from the FMC Resource Library:
- The Food Trust’s A Survey of Farmers Market SNAP Incentive Programs: Lessons, Challenges, and Trends
- Darlene Wolnik’s Vermont Market Currency Feasibility Report
- Project for Public Spaces SNAP/EBT at Your Farmers Market: Seven Steps to Success
Will I receive a 1099-K from the merchant service provider? What do I do with it?
Background on IRS 6050W
On August 16, 2010, the IRS issued final regulations (Treasury Decision 9496) related to Internal Revenue Code Section 6050W, which generally requires information reporting on payment card transactions occurring after December 31, 2010. This rule requires all electronic card processors to issue 1099K’s to all merchants accepting electronic payments. This includes all credit, debit, and food stamp payments. Unfortunately, IRS did not consider the implications this rule would have on non-traditional retailers such as farmers markets operating a scrip system. Notification was made to USDA Food and Nutrition Service after the comment period to this new rule was closed. Farmers Market Coalition, working with other allies, urged the IRS to clarify how this rule would be imposed on markets operating a scrip system. The information that follows is based on the clarifications provided by the IRS on IRC 6050W as it pertains to farmers markets.
Farmers Market Reporting and Conditions for Exemption
As the rule is written, all merchants of electronic payment processors will receive a 1099-K beginning in 2012, reflecting payments made in the prior tax year, informing both the merchant and the IRS of the sum total of all electronic payments (including EBT, debit, and/or credit).
A third party network is any arrangement which involves the establishment of accounts with a central organization by a substantial number of persons (50 or more, according to the legislative history) who provide goods or services, who are unrelated to the organization, and who have agreed to settle transactions through the arrangement. A farmers market operating a token or scrip system is considered a third party network, where customers use electronic payment to receive approved scrip from a central payor (the farmers market), which is then exchanged for goods with individual market stall-holders, who are reimbursed by the central payor.
Third party network transactions are reportable from the central payor (market) to the payee (farmer) only if they meet the definition of a third party network and if the number and amount of the transactions exceeds certain thresholds. Thus, small farmers markets (those with 50 or fewer stall merchants) are not subject to this level of reporting because they are not third party networks. Larger farmers markets that constitute third party networks are subject to 6050W only to the extent that payments to a particular stall merchant involve more than 200 transactions and exceed $20,000 per calendar year (Note: “transactions” refers to the exchange of scrip between farmer and farmers market, not between customer and farmer). In these cases, farmers market managers would collect Taxpayer ID numbers or Social Security Numbers for each of their vendors accepting tokens that originated from electronic transactions, and prepare and issue1099-K’s to each of these vendors that reflected their month-by-month reimbursement transactions.
All transactions are reportable, meaning 1099-K forms to vendors are required if the annual total of scrip reimbursements for a given vendor exceeds $20,000, and the aggregate number of reimbursements exceeds 200 over the course of the calendar year. The total transactions include all debit, credit, and EBT transactions. Here are some tests to determine if you are exempt under this rule clarification.
1) Do you have 50 or more farmers and vendors accepting and redeeming tokens?
If yes, continue to number 2.
If no, then you are exempt from issuing 1099-Ks to your farmers and vendors.
2) Do you have any farmers or vendors to whom you make reimbursements 200 or more times during the year AND the total reimbursement exceeds $20,000?
If yes, then you must issue a 1099-K only to those particular vendors.
If no, then you are exempt.
Note that all vendors are each individually responsible for reporting to the IRS ALL income derived from market sales, including cash, check, token, and electronic sales.
It is recommended that transaction logs be maintained by all markets operating scrip systems, tracking the number of reimbursements and total value of transactions per farmer/vendor. These logs should be maintained as your proof of exemption with IRS.
An excellent example of such a form is the Carrboro Farmers Market Electronic Transaction Workbook, available in the Farmers Market Coalition Resource Library.
Impact on Farmers Market Income
Markets that are operating as a nonprofit, or under the umbrella of a nonprofit, will be able to show the income reported on a 1099-K as pass through income by showing the income and the expense (reimbursements) on their 990. The unredeemed income will be held as a liability on your financial statement.
Markets that are operating EBT under a manager’s personal Social Security Number, however, will need to file a Schedule C-EZ. This form is for Net Profit from Business. Your “income” as reported on the 1099-K from the service provider (for example, FIS Government Solutions), will be recorded here. The income can be offset by noting the expenses deducted out of this income: payments to farmers, operating expenses (e.g. mileage to and from the market, cost of terminal paper, receipt book, etc.). This income can be brought to a negligible sum or zero by this method. The income reported to IRS, then, would not impact your personal income tax.
Persons trying to determine whether they have a reporting obligation, who has the ultimate obligation to report, and how, are advised to contact IRS at 1-800-829-1040. A set of Frequently Asked Questions about IRC 6050W is available the IRS web site at http://www.irs.gov/pub/irs-utl/irdm_section_6050w_faqs_7_23_11.pdf. As always, please check with your own tax accountant for specific instruction.
For more information, watch FMC’s webinar 6050W and Farmers Markets Electronic Payment Reporting Requirements.