ARIZONA HOUSE OF REPRESENTATIVES

SB1143: S/E TPT; crop production tools
PRIME SPONSOR: Senator Griffin, LD 14 BILL STATUS: Caucus & COW                 LARA: DPA/SE 6-2-0-1

Abstract

Relating to TPT and use tax exemption.

Provisions

1. Expands the list of agricultural materials exempt from TPT and use tax to include:

a. liners;

b. transplants;

c. soil and plant additives;

d. agricultural minerals;

e. auxiliary soil and plant substances;

f. micronutrients;

g. fertilizers; and

h. crop protection tools including:

i. insecticides, herbicides, fungicides, rodenticides;

ii. soil fumigants;

iii. desiccants;

iv. harvest aids;

v. adjuvants;

vi. plant nutrients; and

vii. plant growth regulators. (Sec. 1, 2)

Current Law

The sale of seeds, seedlings, roots, bulbs, cuttings and other propagative materials to persons who use these items to commercially produce agricultural, horticultural, viticultural or floricultural crops is exempt from TPT. TPT is a tax placed on a vendor for the privilege of conducting business in Arizona. The seller is responsible for remitting to the State the entire amount of the tax due based on the gross proceeds or gross income. TPT is commonly passed on to the consumer at the point of sale. TPT is categorized into 16 different classifications, one being the retail classification, which is comprised of businesses selling tangible personal property at retail (A.R.S. § 42-5061).

Additionally, the storage, use or consumption of seeds, seedlings, roots, bulbs, cuttings and other propagative materials for use in commercially producing agricultural, horticultural, viticultural or floricultural crops is exempt from taxation. Use tax is levied on items purchased out-of-state that are brought to Arizona for storage, use or consumption. The tax is levied when no tax or a lesser tax rate has been paid in a different state or when TPT is not imposed in a transaction (A.R.S. § 42-5159).

Additional Information

In Wilbur-Ellis Company, et al. v. Arizona Department of Revenue, the Maricopa Superior Court ruled that the interpretation of the term propagative is limited to activities that relate to plant reproduction. For this reason, the Court determined that under current law, fertilizer is not considered a propagative material and is not exempt from TPT or use tax. 

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Fifty-third Legislature                  SB 1143

Second Regular Session                               Version 2: Caucus & COW

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