HB605INTRODUCED
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HB605
J5IEFFY-1
By Representative Robertson
RFD: Ways and Means Education
First Read: 22-Apr-25
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5 J5IEFFY-1 01/29/2025 MF (F)MF 2024-3298
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First Read: 22-Apr-25
SYNOPSIS:
Under existing law, the gross proceeds from the
sale or use of certain agricultural machinery and
equipment are taxed at a rate of one and one-half
percent. The gross proceeds from the sale of other
tangible property sold at retail are taxed at a rate of
four percent.
This bill would exempt the gross proceeds from
the sale of certain agricultural production inputs,
energy used in agriculture, certain diesel exhaust fluid,
and agricultural machinery and equipment from state sales
and use tax and would provide for the administration of
tax exemption certificates to qualified agricultural
producers.
A BILL
TO BE ENTITLED
AN ACT
Relating to taxation; to exempt the gross proceeds from
the sale of certain agricultural production inputs, energy used
in agriculture, certain diesel exhaust fluid, and agricultural
machinery and equipment from state sales and use tax; and to
provide for the administration of tax exemption certificates to
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provide for the administration of tax exemption certificates to
qualified agricultural producers.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. (a) For purposes of this act, the following
terms have the following meanings:
(1) AGRICULTURAL EQUIPMENT AND MACHINERY.
a. Machinery and equipment used in the production of
agricultural products, including, but not limited to, machinery
and equipment used:
1. In the production of poultry and eggs for sale,
including, but not limited to, equipment used in the cleaning
or maintenance of poultry houses;
2. In hatching and breeding of poultry and the breeding
of livestock and equine;
3. In production, processing, and storage of fluid milk
for sale;
4. In drying, ripening, cooking, further processing, or
storage of agricultural products, including, but not limited
to, orchard crops;
5. In production of livestock and equine for sale;
6. By a producer of poultry, eggs, fluid milk, equine, or
livestock for sale;
7. For the purpose of harvesting agricultural products to
be used on the farm by that producer as feed for poultry,
equine, or livestock;
8. In tilling the soil or in animal husbandry;
9. Machinery and equipment used exclusively for
irrigation of agricultural products, including, but not limited
to, fruit, vegetable, and nut crops regardless of whether the
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to, fruit, vegetable, and nut crops regardless of whether the
irrigation machinery or equipment becomes incorporated into
real property; and
10. To cool agricultural products in storage facilities.
b. Farm tractors and attachments to the tractors;
c. Off-road vehicles used primarily in the production of
nursery and horticultural crops;
d. Self-propelled fertilizer or chemical application
equipment sold to persons engaged primarily in producing
agricultural products for sale and which are used exclusively
in tilling, planting, cultivating, and harvesting agricultural
products, including growing, harvesting, or processing onions,
peaches, blackberries, blueberries, or other orchard crops,
nursery, and other horticultural crops;
e. Devices and containers used in the transport and
shipment of agricultural products;
f. Aircraft exclusively used for spraying agricultural
crops;
g. Pecan sprayers, pecan shakers, and other equipment
used in harvesting pecans sold to persons engaged in the
growing, harvesting, and production of pecans;
h. Off-road equipment and related attachments which are
sold to or used by persons engaged primarily in the growing or
harvesting of timber and which are used exclusively in site
preparation, planting, cultivating, or harvesting timber.
i. Grain bins and attachments to grain bins regardless of
whether such grain bins or attachments are incorporated into
real property;
j. Trailers used to transport agricultural products;
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j. Trailers used to transport agricultural products;
k. All-terrain vehicles and multipassenger rough-terrain
vehicles;
l. Any other off-road vehicles used in the production of
agricultural or horticultural products;
m. Any repair, replacement, or component parts installed
on agricultural machinery and equipment; and
n. Equipment used in harvesting, which includes all
off-road equipment and related attachments used in every
forestry procedure starting with the severing of a tree from
the ground until and including the point at which the tree or
its parts in any form have been loaded in the field in or on a
truck or other vehicle for transport to the place of use. For
purposes of this section, off-road equipment shall include, but
not be limited to, skidders, feller bunchers, debarkers,
delimbers, chip harvesters, tub-grinders, woods cutters,
chippers of all types, loaders of all types, dozers, mid-motor
graders, and the related attachments.
(2) AGRICULTURAL OPERATIONS.
a. Includes the following activities:
1. Raising, growing, harvesting, or storing of crops,
including, but not limited to, soil preparation and crop
production services such as plowing, fertilizing, seed bed
preparation, planting, cultivating, and crop protecting
services.
2. Feeding, breeding, or managing livestock, equine, or
poultry.
3. Producing or storing feed for use in the production of
livestock, including, but not limited to, cattle, calves,
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livestock, including, but not limited to, cattle, calves,
swine, hogs, goats, sheep, equine, and rabbits, or for use in
the production of poultry, including, but not limited to,
chickens, hens, ratites, and turkeys.
4. Producing plants, trees, fowl, equine, or other
animals.
5. Producing aquacultural, horticultural, viticultural,
silvicultural, grass sod, dairy, livestock, poultry, egg, and
apiarian products.
6. Processing poultry.
7. Post-harvest services on crops with the intent of
preparing them for market or further processing, including, but
not limited to, crop cleaning, drying, shelling, fumigating,
curing, sorting, grading, packing, ginning, canning, pickling,
and cooling.
8. Slaughtering poultry and other animals.
9. Manufacturing dairy products.
b. "Agricultural operations" excludes constructing,
installing, altering, repairing, dismantling, or demolishing
real property structures or fixtures, including, but not
limited to, grain bins, irrigation equipment, and fencing.
(3) AGRICULTURAL PRODUCTION INPUTS. Seed; seedlings;
plants grown from seed, cuttings, or liners; fertilizers;
insecticides; livestock and poultry feeds, drugs, and
instruments used for the administration of such drugs; fencing
products and materials used to produce agricultural products
regardless of whether the fencing products or materials become
incorporated into real property; fungicides; rodenticides;
herbicides; defoliants; soil fumigants; plant growth regulating
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herbicides; defoliants; soil fumigants; plant growth regulating
chemicals; desiccants, including, but not limited to, shavings
and sawdust from wood, peanut hulls, fuller's earth, straw, and
hay; feed for animals, including, but not limited to,
livestock, fish, equine, hogs, or poultry; sugar used as food
for honeybees kept for the commercial production of honey,
beeswax, and honeybees; cattle, hogs, sheep, equine, poultry,
or bees when sold for breeding purposes; ice or other
refrigerants, including, but not limited to, nitrogen, carbon
dioxide, ammonia, and propylene glycol used in the processing
for market or the chilling of agricultural products in storage
facilities, rooms, compartments, or delivery trucks; materials,
containers, crates, boxes, labels, sacks, bags, or bottles used
for packaging agricultural products when the product is either
sold in the containers, sacks, bags, or bottles directly to the
consumer or when such use is incidental to the sale of the
product for resale; and containers, plastic, canvas, and other
fabrics used in the care and raising of agricultural products
or canvas used in covering feed bins, silos, greenhouses, and
other similar storage structures.
(4) AGRICULTURAL PRODUCTS. Items produced
by agricultural operations. Agricultural products are
considered grown in this state if such products are grown,
produced, or processed in this state, whether or not such
products are composed of constituent products grown or produced
outside this state.
(5) ANIMAL. Livestock and living organisms that are
commonly regarded as farm animals, organisms that produce
tangible personal property for sale, or organisms that are
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tangible personal property for sale, or organisms that are
processed, manufactured, or converted into articles of tangible
personal property for sale. The term does not include living
organisms that are commonly regarded as domestic pets or
companion animals.
(6) COMMISSIONER. The Commissioner of Agriculture and
Industries.
(7) DEPARTMENT. The Alabama Department of Revenue.
(8) ENERGY USED IN AGRICULTURE. Fuels used for
agricultural purposes. The term includes, but is not limited
to, off-road diesel, propane, butane, electricity, natural gas,
wood, wood products, or wood by-products; liquefied petroleum
gas or other fuel used in structures in which broilers,
pullets, or other poultry are raised, in which swine are
raised, in which dairy animals are raised or milked or where
dairy products are stored on a farm, in which agricultural
products are stored, and in which plants, seedlings, nursery
stock, or floral products are raised primarily for the purposes
of making sales of such plants, seedlings, nursery stock, or
floral products for resale; electricity or other fuel for the
operation of an irrigation system which is used on a farm
exclusively for the irrigation of agricultural products; and
electricity or other fuel used in the drying, cooking, or
further processing of raw agricultural products, including, but
not limited to, food processing of raw agricultural products.
(9) QUALIFIED AGRICULTURAL PRODUCER or PRODUCER. Includes
producers of agricultural products who meet one of the
following criteria:
a. The person or entity is the owner or lessee
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a. The person or entity is the owner or lessee
of agricultural land or other real property from which five
thousand dollars ($5,000) or more of agricultural products in
aggregate were produced and sold during the year, including
payments from government sources.
b. The person or entity is in the business of
performing agricultural operations and has provided five
thousand dollars ($5,000) of such services during the year.
c. The person or entity is in the business of producing
long-term agricultural products from which there might not be
annual income, including, but not limited to, timber, pulpwood,
orchard crops, pecans, livestock, and horticultural or other
multiyear agricultural or farm products. Applicants must
demonstrate that sufficient volumes of such
long-term agricultural products will be produced which have the
capacity to generate in aggregate at least five thousand
dollars ($5,000) in annualized sales in the future.
d. The person or entity must establish, to the
satisfaction of the commissioner, that the person or entity is
actively engaged in the production of agricultural products and
has or will have created sufficient volumes to generate in
aggregate at least five thousand dollars ($5,000) in annualized
sales.
(b) The sales and use taxes imposed by Sections 40-23-2,
40-23-37, 40-23-61, and 40-23-63, Code of Alabama 1975, shall
not apply to the sale or use of agricultural production inputs,
energy used in agriculture, diesel exhaust fluid for
agricultural uses only, and agricultural machinery and
equipment when sold or used by a qualified agricultural
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equipment when sold or used by a qualified agricultural
producer issued a certificate of exemption pursuant to this
section.
(c)(1) The commissioner shall require applicants to
acknowledge and produce, upon request, at least one of the
following forms to determine eligibility under this section:
a. Business activity on IRS schedule F (Profit or Loss
from Farming).
b. Farm rental activity on IRS form 4835 (Farm Rental
Income and Expenses) or schedule E (Supplemental Income and
Loss).
c. IRS Form 4797.
d. IRS Form 1065.
e. IRS Form 1120 or 1120(s).
(2) If an applicant does not file any of the forms
provided for in this subsection but claims eligibility for the
exemption certificate pursuant to the criteria specified in
subsection (a), the applicant shall provide to the commissioner
any documentation, tax returns, forms, or sales receipts
required by the commissioner. The commissioner, in his or her
discretion, shall determine if the applicant has met the
eligibility requirements in determining whether to issue or
deny the issuance of the certificate.
(d)(1) Qualified agricultural producers that meet the
criteria provided for in subsection (a) must apply to the
commissioner to request an agricultural sales and use tax
exemption certificate that contains an exemption number. Upon
request, the qualified agricultural producer shall provide the
form or forms requested by the commissioner under subsection
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form or forms requested by the commissioner under subsection
(c) to the commissioner. The application shall be in a form
prescribed by the commissioner and shall contain all of the
following, among other information:
a. a warning to the agricultural producer of the
consequences for providing false information on the application
or for unauthorized use or misuse of the exemption applied for;
b. an acknowledgment by the agricultural producer that
the commissioner is authorized, by the submission of the
application, to share the information contained therein with
the department;
c. an acknowledgment by the agricultural producer that
records of purchases of qualified agricultural products exempt
from sales and use tax shall be maintained and, upon request,
shall be furnished to the commissioner and the department; and
d. any other information, as determined by the
commissioner or department.
(2) The commissioner shall not issue or renew an
agricultural sales and use tax exemption until the agricultural
producer requesting the certificate has provided the
commissioner with a valid state taxpayer identification number
obtained through the department.
(3) Any agricultural sales and use tax exemption
certificate issued or renewed pursuant to this section shall be
valid for three years.
(4) The commissioner shall issue a wallet-sized card
containing the producer's name, address, exemption number, and
expiration date.
(e)(1) The commissioner and the department shall
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(e)(1) The commissioner and the department shall
cooperate in the adoption of rules and procedures governing the
issuance of agricultural exemption certificates and the
administration and enforcement of this section.
(2) A seller, upon the first use of a tax exemption
certificate during any calendar year, shall verify that the
certificate is valid by reviewing the producer's certificate. A
seller may continue to honor the tax exemption certificate
unless the seller receives notice of a suspension or
revocation. A seller may not allow the sales tax exemption if
the producer cannot provide a valid tax exemption certificate.
(3) If a producer knowingly uses a tax exemption
certificate unlawfully, the commissioner, after verifying the
unlawful use of the tax exemption certificate, and subject to
notice and a hearing in accordance with Chapter 22 of Title 41,
Code of Alabama 1975, shall suspend the certificate for up to
one year. If a subsequent unlawful use is knowingly made within
five years following the end of the suspension, the
commissioner, after notice and hearing, may revoke the
certificate. Any producer whose certificate is revoked pursuant
to this paragraph shall not be eligible for the issuance of a
new tax exemption certificate until three years from the date
of such revocation.
(f)(1) The department, in conjunction with the Alabama
Department of Agriculture and Industries, may conduct audits to
monitor compliance with the provisions of this section.
(2) The Department of Agriculture and Industries and the
department shall share information that is necessary to
administer and enforce the provisions of this section. Any
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administer and enforce the provisions of this section. Any
information shared for these purposes, if confidential, shall
retain its character as confidential and privileged
information. The furnishing of information as permitted by this
section shall not be deemed to change the confidential
character of the information furnished. Any person who divulges
any confidential information obtained under this section shall
be subject to the same civil and criminal penalties as provided
for divulgence of confidential information by employees of the
department.
(3) Upon issuance of a new or renewed tax exemption
certificate, the Department of Agriculture and Industries shall
provide the applicant with informational material regarding the
lawful use of the tax exemption certificate. Any seller of tax
exempt products under this section shall also be provided with
this informational material. Any person who knowingly uses a
certificate unlawfully shall be subject to any civil or
criminal penalties authorized by law in addition to the
suspension or revocation of such certificate.
(g) Contractors shall not incur any use tax on:
(1) Tangible personal property that a qualified
agricultural producer purchases tax-exempt under this section
and furnishes to a contractor for use in the performance of
an agricultural operation, if the property retains the
character of tangible personal property and is returned to the
qualified agricultural producer upon the completion of the
contract; or
(2) Grain bins, irrigation equipment, and fencing or the
repair, replacement, or component parts to grain bins,
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repair, replacement, or component parts to grain bins,
irrigation equipment, or fencing that a qualified agricultural
producer purchases tax-exempt under this section for use in an
agricultural operation and furnishes to a contractor for
installation into real property.
(h) The Department of Agriculture and Industries and the
department shall jointly publish an annual report on the
websites of the respective departments detailing the activity
in administering and enforcing the provisions of this section.
The report shall include, but not be limited to, the:
a. Number of new tax exemption certificates issued;
b. Number of renewed tax exemption certificates issued;
and
c. Number of tax exemption certificates revoked or
suspended due to knowingly unlawful activity.
Section 2. This act shall become effective on September
1, 2025.
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