ATLANTA — A recent audit of a sales tax exemption program for farmers has brought new scrutiny to a popular tax break.

About 38,000 people and businesses participate in a program known as GATE – for Georgia Agricultural Tax Exemption – that allows eligible producers to buy work-related items without paying sales tax.

That perk likely costs state and local coffers $300 million in lost revenue, according to state auditors. But an audit, which was released in October, found that it’s unclear what economic impact the program is offering in return – and if the right people are getting the tax break.

The audit recommended several changes to fix that, such as beefing up the application process and strengthening the state’s ability to enforce the program’s rules.

“Ultimately, lack of enforcement leaves the program vulnerable to misuse and abuse and reduces the deterrent effect of the audit function,” the document said.

The state Department of Revenue has, in fact, uncovered misuse through dozens of GATE audits. The agency can reclaim the unpaid taxes, plus penalties and interest, when it catches such abuse.

About two-thirds of the 42 audits the department has performed found improper use of the tax break, according to the report. Of those, 14 audits flagged cardholders who made non-qualifying purchases. Another 15 audits found cardholders who weren’t eligible to have the card.

But state law bars the agency for sharing its findings with the state Department of Agriculture, which has the authority to revoke card privileges.

The scrutiny frustrated some, though. Rep. Sam Watson, R-Moultrie, who chairs the rural caucus, said the audit unfairly singles out the state’s agricultural industry.

“It’s economic development. It’s no different than the film industry getting what they’re getting, Delta getting what they’re getting, manufacturing getting what they’re getting,” Watson said this week, referring to other industry tax exemptions. “What’s the difference?

“If we’re going to talk about people, let’s talk about everybody,” he said.

A state Senate study committee is attempting to do that. Troubled by the growing number of tax exemptions approved under the Gold Dome, the Senate formed a panel that is developing a process to assess the effectiveness of existing tax breaks and size up the merit of proposed new tax breaks moving forward.

That committee has met during the legislative break but has not yet finalized its report.

A sales tax exemption for agriculture goes back to the 1960s, when it first applied to fertilizer, seed and livestock. Other items have since been added.

GATE started in 2013 as a way to put the exemptions under one program. Participants were also issued a card, which they present to retailers.

As the program has expanded over the years, the exemption has taken a bigger bite out of government tax revenues. For most local governments, sales tax is the second largest pot of revenue, although rural communities usually have a more limited sales tax base.

In areas such as Colquitt County in south Georgia, where 91 percent of the county is zoned as agriculture, such tax breaks can be especially brutal.

Chas Cannon, who is Colquitt County’s administrator, said the shrinking revenue stream hampers local efforts to recruit and retain industry through enticements such as incentives, waived permits or infrastructure improvements.

“Those funds have to come from somewhere,” said Cannon, who has a GATE card for timber production.

“And the more we’re exempting ag sales tax in a large agricultural county, it just makes that much harder for us to compete with those urban and metro counties for job growth and industry growth,” he added. “It’s just a fact.”

Cannon pointed to an overall $4.8 million shortfall in the projected collections from a 2013-approved local sales tax. GATE cannot be entirely blamed, Cannon said, but the program is a likely contributor.

He said the county continues to ask state legislators to look at tightening the program’s requirements, narrowing the eligibility and adding safeguards to protect the program from abuse.

Watson, who represents Colquitt County, said there is discussion about raising the income threshold to $5,000 a year (up from $2,500), moving to a three-year card with a $150 fee (as opposed to a $25 annual fee), and changing state law so the Department of Agriculture can act on the Department of Revenue’s audit results.

A similar measure stalled in the 2016 legislative session. Geoff Duncan, a Republican who recently resigned his House seat to run for lieutenant governor, carried that bill.

“We just wanted to make sure we got it right,” Duncan said Friday, adding that he believes all government programs – including GATE – should be “continuously reviewed and improved.”

When asked about the changes Watson mentioned, a spokesman for the Department of Agriculture said the agency is mulling ideas that “solidify a program that is very beneficial to the thousands of farming families across the state.”

“There have been a number of ideas for modifications to the GATE card program discussed over the last few years that could greatly enhance the program’s effectiveness, and we do agree that information sharing is pivotal to the program’s success,” Alec Asbridge, director of business operations, said in a statement.

The state audit has brought new life to those efforts, but Watson – who is also a vegetable farmer and a GATE cardholder – said the review’s timing also highlights the importance of the program.

Many producers, he said, are struggling to recover from storms while contending with cheap commodity prices and disease-carrying white flies.

“In some cases, that’s the only relief these guys are getting,” he said, referring to GATE.

Jill Nolin covers the Georgia Statehouse for CNHI’s newspapers and websites. Reach her at jnolin@cnhi.com.