SALES AND USE TAX EXEMPTIONS ON

CERTAIN AGRICULTURAL PROPERTY

House Bills 5889 and 5890 as introduced

Sponsor:  Rep. Dan Lauwers

Committee:  Agriculture

Complete to 9-20-16

SUMMARY:

Current statutes provide sales and use tax exemptions for certain tangible personal property used in agriculture and aquaculture.  Among other things, the exemption applies to agricultural land tile, portable grain bins, and grain handling equipment when sold to persons engaged in an agricultural business enterprise.  House Bills 5889 and 5890 would specify that the exemption also applies when the property listed above is sold to a person in the business of constructing, altering, repairing, or improving real estate for others to the extent that it is affixed to or made a structural part of real estate and is used for an exempt [agricultural] purpose.

Currently, the agricultural sales and use tax exemptions do not apply to tangible personal property permanently affixed and becoming a structural part of real estate.  The bills specify, however, that the exemptions do apply to agricultural land tile, portable grain bins, and grain handling equipment.

House Bill 5889 would amend the General Sales Tax Act (MCL 205.54a).  House Bill 5890 would amend and the Use Tax Act (MCL 205.94).

House Bill 5890 also contains amendments that will make the use tax provisions for agriculture and aquaculture the same as current sales tax provisions; specifically they cite property used in the direct gathering of fish (with exceptions) and subsurface irrigation pipe.  Typically provisions in the sales and use tax acts mirror one another.

FISCAL IMPACT:

Because the bills are designed to codify Treasury's existing interpretation, there will be no fiscal impact.

                                                                                        Legislative Analyst:   Josh Roesner

                                                                                                Fiscal Analyst:   Jim Stansell

■ This analysis was prepared by nonpartisan House Fiscal Agency staff for use by House members in their deliberations, and does not constitute an official statement of legislative intent.