Fiscal Note
BILL # HB 2400 TITLE: TPT; exemption; agricultural equipment
SPONSOR: Dunn STATUS: As Introduced
PREPARED BY: Nate Belcher
Description
Under current law, new machinery and equipment used for commercial production of agricultural crops are exempt from
the Transaction Privilege Tax (TPT). New machinery and equipment that are leased or rented (as opposed to purchased)
are also exempt from TPT if the lease is for at least 2 years. The bill would be effective on the first of the month after the
general effective date.
This bill expands the current TPT exemption to include used (as opposed to new) agricultural machinery and equipment as
well as short-term rentals (leases for less than 2 years). In addition, the bill adds a new exemption for off-highway
vehicles.
Estimated Impact
We estimate that HB 2400 would reduce the General Fund portion of TPT revenue distributions by $(583,000) on an
annual basis.
Analysis
According to the Department of Revenue's (DOR) most recent Tax Expenditure Report, businesses deducted an estimated
$211 million in TPT exemptions for new agricultural machinery and equipment in FY 2021.
Anecdotal evidence from an agricultural equipment retailer suggests that under HB 2400, sales totaling 5% to 10% of the
current annual volume of agricultural equipment sales subject to the current TPT exemption would also become exempt
under the bill. Based on such information, we estimate that sales totaling 7.5% (midpoint between 5% and 10%) of the
$211 million figure reported by DOR, or $15.8 million, would be exempted from TPT under the bill. At the general state
TPT rate of 5%, the state revenue loss would be an estimated $(790,000). Since the General Fund receives 73.8% of retail
TPT, the General Fund revenue loss would be an estimated $(583,000).
Local Government Impact
State TPT revenues are shared with local governments and any reduction in these collections would result in decreased
distributions to cities and counties. We estimate that HB 2400 will result in $(207,000) in reduced TPT distributions to
localities, including $(79,000) for cities and $(128,000) for counties.
2/18/22