DAR File No. 27384

Tax Commission, Auditing

R865-19S-49

Sales to and by Farmers and Other Agricultural Producers Pursuant to Utah Code Ann. Section 59-12-104

NOTICE OF PROPOSED RULE

DAR File No.: 27384
Filed: 09/01/2004, 01:21
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

Section 59-12-104 provides a sales tax exemption for property used primarily and directly in farming operations.

Summary of the rule or change:

The proposed amendments define "farming operation" for purposes of the sales tax exemption for property used primarily and directly in farming operations as an operation that is eligible to deduct farm-related expenses for federal tax purposes. The previous language required the filing of a federal schedule F in order to take the exemption.

State statutory or constitutional authorization for this rule:

Section 59-12-104

Anticipated cost or savings to:

the state budget:

Insignificant decrease in revenue since not all operations with a loss file a federal schedule F, but are none the less engaged in the business of farming.

local governments:

Insignificant decrease in revenue since not all operations with a loss file a federal schedule F, but are none the less engaged in the business of farming.

other persons:

Insignificant savings because amendments will allow an entity with a loss that does not file federal schedule F to qualify for the exemption if the entity is eligible to deduct farm-related expenses for income tax purposes.

Compliance costs for affected persons:

None--The amendments will allow some individuals to qualify for the exemption that the current rule does not allow.

Comments by the department head on the fiscal impact the rule may have on businesses:

There could be a slight tax savings for some farming operations on sales tax paid for some purchases.

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Direct questions regarding this rule to:

Cheryl Lee at the above address, by phone at 801-297-3900, by FAX at 801-297-3919, or by Internet E-mail at clee@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

10/15/2004

This rule may become effective on:

10/16/2004

Authorized by:

Pam Hendrickson, Commissioner

RULE TEXT

R865. Tax Commission, Auditing.

R865-19S. Sales and Use Tax.

R865-19S-49. Sales to and by Farmers and Other Agricultural Producers Pursuant to Utah Code Ann. Section 59-12-104.

A. 1. For purposes of the sales and use tax exemption for tangible personal property used or consumed primarily and directly in farming operations, a person is engaged in "farming operations" if that person may deduct farm related expenses under Sections 162 or 212, Internal Revenue Code.

2. To determine whether a person may deduct farm related expenses under Sections 162 or 212 of the Internal Revenue Code, the commission shall consider Treas. Reg. Sections 1.183-1 and 1.183-2.

[A.]B. The purchase of feed, medicine, and veterinary supplies by a farmer or other agricultural producer qualify for the sales and use tax exemption for tangible personal property used or consumed primarily and directly in farming operations if the feed, medicine, or veterinary supplies are used:

1. to produce or care for agricultural products that are for sale;

2. to feed or care for working dogs and working horses in agricultural use;

3. to feed or care for animals that are marketed.

[B.]C. Fur-bearing animals that are kept for breeding or for their products are agricultural products.

[ C. The sales and use tax exemption for sales of tangible personal property used or consumed primarily and directly in farming operations applies only to commercial farming operations, as evidenced by the filing of a federal Farm Income and Expenses Statement (Schedule F) or other similar evidence that the farm is operated as a commercial venture.

] D. A vendor making sales to a farmer or other agricultural producer is liable for the tax unless that vendor obtains from the purchaser a certificate as set forth in Rule R865-19S-23.

E. Poultry, eggs, and dairy products are not seasonal products for purposes of the sales and use tax exemption for the exclusive sale of locally grown seasonal crops, seedling plants, or garden, farm, or other agricultural produce sold by a producer during the harvest season.

KEY: charities, tax exemptions, religious activities, sales tax

2004

Notice of Continuation April 5, 2002

59-12-104

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Cheryl Lee at the above address, by phone at 801-297-3900, by FAX at 801-297-3919, or by Internet E-mail at clee@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.