 |
ARIZONA STATE SENATE
Fifty-Fourth Legislature, First Regular Session
TPT exemption; crop production tools
Purpose
Exempts the sales or income from sales of propagative materials from transaction privilege, use and municipal tax.
Background
Current statute exempts from the tax imposed on the retail classification the gross proceeds of sales or gross income from sales of seeds, seedlings, roots, bulbs, cuttings and other propagative materials to persons who use those items to commercially produce agricultural, horticultural, viticultural or floricultural crops in Arizona (A.R.S. §§ 42-5061 and 42-5061; Version 2).
Seeds, seedlings, roots, bulbs, cuttings and other propagative materials for use in commercially producing agricultural, horticultural, viticultural or floricultural crops in Arizona are exempt from the use tax on tangible personal property purchased and brought into Arizona for storage, use or consumption in Arizona (A.R.S. § 42-5159).
In Wilbur-Ellis Company, et al. v. Arizona Department of Revenue (ADOR) (2019), the Arizona Court of Appeals Division One upheld the Maricopa County Superior Court ruling that fertilizers and pesticides are not propagative material and are therefore subject to transaction privilege and use tax.
A Joint Legislative Budget Committee (JLBC) fiscal note estimates a negative fiscal impact to the state General Fund of $17.1 million annually, beginning in FY 2020, as a result of exempting fertilizers and pesticides from transaction privilege and sales taxes. The JLBC estimates negative fiscal impacts of $7.0 million to counties and $2.3 million to cities (JLBC fiscal note).
Provisions
2. Adds to the use tax exemption the storage, use or consumption in Arizona of liners, transplants, soil and plant additives, agricultural minerals, auxiliary soil and plant substances, micronutrients, fertilizers, insecticides, herbicides, fungicides, soil fumigants, desiccants, rodenticides, adjuvants, plant nutrients and plant growth regulators for use in commercially producing agricultural, horticultural, viticultural or floricultural crops in Arizona.
3. Prohibits a city, town or special taxing district from levying a transaction privilege, sales, use or other similar tax on the gross proceeds of sales or gross income from sales of propagative materials to persons that use those items to commercially produce agricultural, horticultural, viticultural or floricultural crops in Arizona.
4. Defines propagative materials as seeds, seedlings, roots, bulbs, liners, transplants, cuttings, soil and plant additives, agricultural minerals, auxiliary soil and plant substances, micronutrients, fertilizers, insecticides, herbicides, fungicides, soil fumigants, desiccants, rodenticides, adjuvants, plant nutrients and plant growth regulators.
5. Excludes from propagative materials any propagative materials used in producing any part, including seeds, of any plant of the genus cannabis, except for use in commercially producing industrial hemp.
6. Specifies that ADOR shall not pay any refund of taxes paid before the effective date.
7. Makes technical changes.
8. Contains a technical conditional enactment for provisions affecting sections amended by Laws 2018, Chapter 263.
9. Becomes effective on the general effective date, retroactive to taxable periods beginning July 1, 2019, except as otherwise noted.
House Action
LAG 2/7/19 DP 5-2-0-0
WM 2/13/19 DP 6-4-0-0
3rd Read 2/25/19 32-28-0
Prepared by Senate Research
March 11, 2019
CS/gs