Alabama 2025 Regular Session

Alabama House Bill HB605 Compare Versions

Only one version of the bill is available at this time.

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1	1	HB605INTRODUCED
2	2	Page 0
3	3	HB605
4	4	J5IEFFY-1
5	5	By Representative Robertson
6	6	RFD: Ways and Means Education
7	7	First Read: 22-Apr-25
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12	12	5 J5IEFFY-1 01/29/2025 MF (F)MF 2024-3298
13	13	Page 1
14	14	First Read: 22-Apr-25
15	15	SYNOPSIS:
16	16	Under existing law, the gross proceeds from the
17	17	sale or use of certain agricultural machinery and
18	18	equipment are taxed at a rate of one and one-half
19	19	percent. The gross proceeds from the sale of other
20	20	tangible property sold at retail are taxed at a rate of
21	21	four percent.
22	22	This bill would exempt the gross proceeds from
23	23	the sale of certain agricultural production inputs,
24	24	energy used in agriculture, certain diesel exhaust fluid,
25	25	and agricultural machinery and equipment from state sales
26	26	and use tax and would provide for the administration of
27	27	tax exemption certificates to qualified agricultural
28	28	producers.
29	29	A BILL
30	30	TO BE ENTITLED
31	31	AN ACT
32	32	Relating to taxation; to exempt the gross proceeds from
33	33	the sale of certain agricultural production inputs, energy used
34	34	in agriculture, certain diesel exhaust fluid, and agricultural
35	35	machinery and equipment from state sales and use tax; and to
36	36	provide for the administration of tax exemption certificates to
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66	66	provide for the administration of tax exemption certificates to
67	67	qualified agricultural producers.
68	68	BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
69	69	Section 1. (a) For purposes of this act, the following
70	70	terms have the following meanings:
71	71	(1) AGRICULTURAL EQUIPMENT AND MACHINERY.
72	72	a. Machinery and equipment used in the production of
73	73	agricultural products, including, but not limited to, machinery
74	74	and equipment used:
75	75	1. In the production of poultry and eggs for sale,
76	76	including, but not limited to, equipment used in the cleaning
77	77	or maintenance of poultry houses;
78	78	2. In hatching and breeding of poultry and the breeding
79	79	of livestock and equine;
80	80	3. In production, processing, and storage of fluid milk
81	81	for sale;
82	82	4. In drying, ripening, cooking, further processing, or
83	83	storage of agricultural products, including, but not limited
84	84	to, orchard crops;
85	85	5. In production of livestock and equine for sale;
86	86	6. By a producer of poultry, eggs, fluid milk, equine, or
87	87	livestock for sale;
88	88	7. For the purpose of harvesting agricultural products to
89	89	be used on the farm by that producer as feed for poultry,
90	90	equine, or livestock;
91	91	8. In tilling the soil or in animal husbandry;
92	92	9. Machinery and equipment used exclusively for
93	93	irrigation of agricultural products, including, but not limited
94	94	to, fruit, vegetable, and nut crops regardless of whether the
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124	124	to, fruit, vegetable, and nut crops regardless of whether the
125	125	irrigation machinery or equipment becomes incorporated into
126	126	real property; and
127	127	10. To cool agricultural products in storage facilities.
128	128	b. Farm tractors and attachments to the tractors;
129	129	c. Off-road vehicles used primarily in the production of
130	130	nursery and horticultural crops;
131	131	d. Self-propelled fertilizer or chemical application
132	132	equipment sold to persons engaged primarily in producing
133	133	agricultural products for sale and which are used exclusively
134	134	in tilling, planting, cultivating, and harvesting agricultural
135	135	products, including growing, harvesting, or processing onions,
136	136	peaches, blackberries, blueberries, or other orchard crops,
137	137	nursery, and other horticultural crops;
138	138	e. Devices and containers used in the transport and
139	139	shipment of agricultural products;
140	140	f. Aircraft exclusively used for spraying agricultural
141	141	crops;
142	142	g. Pecan sprayers, pecan shakers, and other equipment
143	143	used in harvesting pecans sold to persons engaged in the
144	144	growing, harvesting, and production of pecans;
145	145	h. Off-road equipment and related attachments which are
146	146	sold to or used by persons engaged primarily in the growing or
147	147	harvesting of timber and which are used exclusively in site
148	148	preparation, planting, cultivating, or harvesting timber.
149	149	i. Grain bins and attachments to grain bins regardless of
150	150	whether such grain bins or attachments are incorporated into
151	151	real property;
152	152	j. Trailers used to transport agricultural products;
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182	182	j. Trailers used to transport agricultural products;
183	183	k. All-terrain vehicles and multipassenger rough-terrain
184	184	vehicles;
185	185	l. Any other off-road vehicles used in the production of
186	186	agricultural or horticultural products;
187	187	m. Any repair, replacement, or component parts installed
188	188	on agricultural machinery and equipment; and
189	189	n. Equipment used in harvesting, which includes all
190	190	off-road equipment and related attachments used in every
191	191	forestry procedure starting with the severing of a tree from
192	192	the ground until and including the point at which the tree or
193	193	its parts in any form have been loaded in the field in or on a
194	194	truck or other vehicle for transport to the place of use. For
195	195	purposes of this section, off-road equipment shall include, but
196	196	not be limited to, skidders, feller bunchers, debarkers,
197	197	delimbers, chip harvesters, tub-grinders, woods cutters,
198	198	chippers of all types, loaders of all types, dozers, mid-motor
199	199	graders, and the related attachments.
200	200	(2) AGRICULTURAL OPERATIONS.
201	201	a. Includes the following activities:
202	202	1. Raising, growing, harvesting, or storing of crops,
203	203	including, but not limited to, soil preparation and crop
204	204	production services such as plowing, fertilizing, seed bed
205	205	preparation, planting, cultivating, and crop protecting
206	206	services.
207	207	2. Feeding, breeding, or managing livestock, equine, or
208	208	poultry.
209	209	3. Producing or storing feed for use in the production of
210	210	livestock, including, but not limited to, cattle, calves,
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240	240	livestock, including, but not limited to, cattle, calves,
241	241	swine, hogs, goats, sheep, equine, and rabbits, or for use in
242	242	the production of poultry, including, but not limited to,
243	243	chickens, hens, ratites, and turkeys.
244	244	4. Producing plants, trees, fowl, equine, or other
245	245	animals.
246	246	5. Producing aquacultural, horticultural, viticultural,
247	247	silvicultural, grass sod, dairy, livestock, poultry, egg, and
248	248	apiarian products.
249	249	6. Processing poultry.
250	250	7. Post-harvest services on crops with the intent of
251	251	preparing them for market or further processing, including, but
252	252	not limited to, crop cleaning, drying, shelling, fumigating,
253	253	curing, sorting, grading, packing, ginning, canning, pickling,
254	254	and cooling.
255	255	8. Slaughtering poultry and other animals.
256	256	9. Manufacturing dairy products.
257	257	b. "Agricultural operations" excludes constructing,
258	258	installing, altering, repairing, dismantling, or demolishing
259	259	real property structures or fixtures, including, but not
260	260	limited to, grain bins, irrigation equipment, and fencing.
261	261	(3) AGRICULTURAL PRODUCTION INPUTS. Seed; seedlings;
262	262	plants grown from seed, cuttings, or liners; fertilizers;
263	263	insecticides; livestock and poultry feeds, drugs, and
264	264	instruments used for the administration of such drugs; fencing
265	265	products and materials used to produce agricultural products
266	266	regardless of whether the fencing products or materials become
267	267	incorporated into real property; fungicides; rodenticides;
268	268	herbicides; defoliants; soil fumigants; plant growth regulating
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298	298	herbicides; defoliants; soil fumigants; plant growth regulating
299	299	chemicals; desiccants, including, but not limited to, shavings
300	300	and sawdust from wood, peanut hulls, fuller's earth, straw, and
301	301	hay; feed for animals, including, but not limited to,
302	302	livestock, fish, equine, hogs, or poultry; sugar used as food
303	303	for honeybees kept for the commercial production of honey,
304	304	beeswax, and honeybees; cattle, hogs, sheep, equine, poultry,
305	305	or bees when sold for breeding purposes; ice or other
306	306	refrigerants, including, but not limited to, nitrogen, carbon
307	307	dioxide, ammonia, and propylene glycol used in the processing
308	308	for market or the chilling of agricultural products in storage
309	309	facilities, rooms, compartments, or delivery trucks; materials,
310	310	containers, crates, boxes, labels, sacks, bags, or bottles used
311	311	for packaging agricultural products when the product is either
312	312	sold in the containers, sacks, bags, or bottles directly to the
313	313	consumer or when such use is incidental to the sale of the
314	314	product for resale; and containers, plastic, canvas, and other
315	315	fabrics used in the care and raising of agricultural products
316	316	or canvas used in covering feed bins, silos, greenhouses, and
317	317	other similar storage structures.
318	318	(4) AGRICULTURAL PRODUCTS. Items produced
319	319	by agricultural operations. Agricultural products are
320	320	considered grown in this state if such products are grown,
321	321	produced, or processed in this state, whether or not such
322	322	products are composed of constituent products grown or produced
323	323	outside this state.
324	324	(5) ANIMAL. Livestock and living organisms that are
325	325	commonly regarded as farm animals, organisms that produce
326	326	tangible personal property for sale, or organisms that are
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356	356	tangible personal property for sale, or organisms that are
357	357	processed, manufactured, or converted into articles of tangible
358	358	personal property for sale. The term does not include living
359	359	organisms that are commonly regarded as domestic pets or
360	360	companion animals.
361	361	(6) COMMISSIONER. The Commissioner of Agriculture and
362	362	Industries.
363	363	(7) DEPARTMENT. The Alabama Department of Revenue.
364	364	(8) ENERGY USED IN AGRICULTURE. Fuels used for
365	365	agricultural purposes. The term includes, but is not limited
366	366	to, off-road diesel, propane, butane, electricity, natural gas,
367	367	wood, wood products, or wood by-products; liquefied petroleum
368	368	gas or other fuel used in structures in which broilers,
369	369	pullets, or other poultry are raised, in which swine are
370	370	raised, in which dairy animals are raised or milked or where
371	371	dairy products are stored on a farm, in which agricultural
372	372	products are stored, and in which plants, seedlings, nursery
373	373	stock, or floral products are raised primarily for the purposes
374	374	of making sales of such plants, seedlings, nursery stock, or
375	375	floral products for resale; electricity or other fuel for the
376	376	operation of an irrigation system which is used on a farm
377	377	exclusively for the irrigation of agricultural products; and
378	378	electricity or other fuel used in the drying, cooking, or
379	379	further processing of raw agricultural products, including, but
380	380	not limited to, food processing of raw agricultural products.
381	381	(9) QUALIFIED AGRICULTURAL PRODUCER or PRODUCER. Includes
382	382	producers of agricultural products who meet one of the
383	383	following criteria:
384	384	a. The person or entity is the owner or lessee
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414	414	a. The person or entity is the owner or lessee
415	415	of agricultural land or other real property from which five
416	416	thousand dollars ($5,000) or more of agricultural products in
417	417	aggregate were produced and sold during the year, including
418	418	payments from government sources.
419	419	b. The person or entity is in the business of
420	420	performing agricultural operations and has provided five
421	421	thousand dollars ($5,000) of such services during the year.
422	422	c. The person or entity is in the business of producing
423	423	long-term agricultural products from which there might not be
424	424	annual income, including, but not limited to, timber, pulpwood,
425	425	orchard crops, pecans, livestock, and horticultural or other
426	426	multiyear agricultural or farm products. Applicants must
427	427	demonstrate that sufficient volumes of such
428	428	long-term agricultural products will be produced which have the
429	429	capacity to generate in aggregate at least five thousand
430	430	dollars ($5,000) in annualized sales in the future.
431	431	d. The person or entity must establish, to the
432	432	satisfaction of the commissioner, that the person or entity is
433	433	actively engaged in the production of agricultural products and
434	434	has or will have created sufficient volumes to generate in
435	435	aggregate at least five thousand dollars ($5,000) in annualized
436	436	sales.
437	437	(b) The sales and use taxes imposed by Sections 40-23-2,
438	438	40-23-37, 40-23-61, and 40-23-63, Code of Alabama 1975, shall
439	439	not apply to the sale or use of agricultural production inputs,
440	440	energy used in agriculture, diesel exhaust fluid for
441	441	agricultural uses only, and agricultural machinery and
442	442	equipment when sold or used by a qualified agricultural
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472	472	equipment when sold or used by a qualified agricultural
473	473	producer issued a certificate of exemption pursuant to this
474	474	section.
475	475	(c)(1) The commissioner shall require applicants to
476	476	acknowledge and produce, upon request, at least one of the
477	477	following forms to determine eligibility under this section:
478	478	a. Business activity on IRS schedule F (Profit or Loss
479	479	from Farming).
480	480	b. Farm rental activity on IRS form 4835 (Farm Rental
481	481	Income and Expenses) or schedule E (Supplemental Income and
482	482	Loss).
483	483	c. IRS Form 4797.
484	484	d. IRS Form 1065.
485	485	e. IRS Form 1120 or 1120(s).
486	486	(2) If an applicant does not file any of the forms
487	487	provided for in this subsection but claims eligibility for the
488	488	exemption certificate pursuant to the criteria specified in
489	489	subsection (a), the applicant shall provide to the commissioner
490	490	any documentation, tax returns, forms, or sales receipts
491	491	required by the commissioner. The commissioner, in his or her
492	492	discretion, shall determine if the applicant has met the
493	493	eligibility requirements in determining whether to issue or
494	494	deny the issuance of the certificate.
495	495	(d)(1) Qualified agricultural producers that meet the
496	496	criteria provided for in subsection (a) must apply to the
497	497	commissioner to request an agricultural sales and use tax
498	498	exemption certificate that contains an exemption number. Upon
499	499	request, the qualified agricultural producer shall provide the
500	500	form or forms requested by the commissioner under subsection
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530	530	form or forms requested by the commissioner under subsection
531	531	(c) to the commissioner. The application shall be in a form
532	532	prescribed by the commissioner and shall contain all of the
533	533	following, among other information:
534	534	a. a warning to the agricultural producer of the
535	535	consequences for providing false information on the application
536	536	or for unauthorized use or misuse of the exemption applied for;
537	537	b. an acknowledgment by the agricultural producer that
538	538	the commissioner is authorized, by the submission of the
539	539	application, to share the information contained therein with
540	540	the department;
541	541	c. an acknowledgment by the agricultural producer that
542	542	records of purchases of qualified agricultural products exempt
543	543	from sales and use tax shall be maintained and, upon request,
544	544	shall be furnished to the commissioner and the department; and
545	545	d. any other information, as determined by the
546	546	commissioner or department.
547	547	(2) The commissioner shall not issue or renew an
548	548	agricultural sales and use tax exemption until the agricultural
549	549	producer requesting the certificate has provided the
550	550	commissioner with a valid state taxpayer identification number
551	551	obtained through the department.
552	552	(3) Any agricultural sales and use tax exemption
553	553	certificate issued or renewed pursuant to this section shall be
554	554	valid for three years.
555	555	(4) The commissioner shall issue a wallet-sized card
556	556	containing the producer's name, address, exemption number, and
557	557	expiration date.
558	558	(e)(1) The commissioner and the department shall
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588	588	(e)(1) The commissioner and the department shall
589	589	cooperate in the adoption of rules and procedures governing the
590	590	issuance of agricultural exemption certificates and the
591	591	administration and enforcement of this section.
592	592	(2) A seller, upon the first use of a tax exemption
593	593	certificate during any calendar year, shall verify that the
594	594	certificate is valid by reviewing the producer's certificate. A
595	595	seller may continue to honor the tax exemption certificate
596	596	unless the seller receives notice of a suspension or
597	597	revocation. A seller may not allow the sales tax exemption if
598	598	the producer cannot provide a valid tax exemption certificate.
599	599	(3) If a producer knowingly uses a tax exemption
600	600	certificate unlawfully, the commissioner, after verifying the
601	601	unlawful use of the tax exemption certificate, and subject to
602	602	notice and a hearing in accordance with Chapter 22 of Title 41,
603	603	Code of Alabama 1975, shall suspend the certificate for up to
604	604	one year. If a subsequent unlawful use is knowingly made within
605	605	five years following the end of the suspension, the
606	606	commissioner, after notice and hearing, may revoke the
607	607	certificate. Any producer whose certificate is revoked pursuant
608	608	to this paragraph shall not be eligible for the issuance of a
609	609	new tax exemption certificate until three years from the date
610	610	of such revocation.
611	611	(f)(1) The department, in conjunction with the Alabama
612	612	Department of Agriculture and Industries, may conduct audits to
613	613	monitor compliance with the provisions of this section.
614	614	(2) The Department of Agriculture and Industries and the
615	615	department shall share information that is necessary to
616	616	administer and enforce the provisions of this section. Any
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646	646	administer and enforce the provisions of this section. Any
647	647	information shared for these purposes, if confidential, shall
648	648	retain its character as confidential and privileged
649	649	information. The furnishing of information as permitted by this
650	650	section shall not be deemed to change the confidential
651	651	character of the information furnished. Any person who divulges
652	652	any confidential information obtained under this section shall
653	653	be subject to the same civil and criminal penalties as provided
654	654	for divulgence of confidential information by employees of the
655	655	department.
656	656	(3) Upon issuance of a new or renewed tax exemption
657	657	certificate, the Department of Agriculture and Industries shall
658	658	provide the applicant with informational material regarding the
659	659	lawful use of the tax exemption certificate. Any seller of tax
660	660	exempt products under this section shall also be provided with
661	661	this informational material. Any person who knowingly uses a
662	662	certificate unlawfully shall be subject to any civil or
663	663	criminal penalties authorized by law in addition to the
664	664	suspension or revocation of such certificate.
665	665	(g) Contractors shall not incur any use tax on:
666	666	(1) Tangible personal property that a qualified
667	667	agricultural producer purchases tax-exempt under this section
668	668	and furnishes to a contractor for use in the performance of
669	669	an agricultural operation, if the property retains the
670	670	character of tangible personal property and is returned to the
671	671	qualified agricultural producer upon the completion of the
672	672	contract; or
673	673	(2) Grain bins, irrigation equipment, and fencing or the
674	674	repair, replacement, or component parts to grain bins,
675	675	309
676	676	310
677	677	311
678	678	312
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681	681	315
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699	699	333
700	700	334
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702	702	336 HB605 INTRODUCED
703	703	Page 13
704	704	repair, replacement, or component parts to grain bins,
705	705	irrigation equipment, or fencing that a qualified agricultural
706	706	producer purchases tax-exempt under this section for use in an
707	707	agricultural operation and furnishes to a contractor for
708	708	installation into real property.
709	709	(h) The Department of Agriculture and Industries and the
710	710	department shall jointly publish an annual report on the
711	711	websites of the respective departments detailing the activity
712	712	in administering and enforcing the provisions of this section.
713	713	The report shall include, but not be limited to, the:
714	714	a. Number of new tax exemption certificates issued;
715	715	b. Number of renewed tax exemption certificates issued;
716	716	and
717	717	c. Number of tax exemption certificates revoked or
718	718	suspended due to knowingly unlawful activity.
719	719	Section 2. This act shall become effective on September
720	720	1, 2025.
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735	735	351
736	736	352