TAX: Sales Tax
IsSUE: Sales Tax Exemption for Certain Faml Equipment
BILL NUMBER(S): SB 1828
MONTH/YEAR COLLECfION IMPAcr BEGINs: January 1, 2002
DATE OFANALYSIs: March 22, 2001
SEcrION I: NARRATIVE
8. Current Law:
Pursuant to s. 212.08(3), F .S., the sale, rental, lease,use, consumption, and storage of self-propelled, power-drawn or power-
driven farm equipment used exclusively by a farmer on a farm or in a forest in the agricultural production of crops or products, or fire
prevention and suppressionwork with regard to crops and products, is subject to salestax in Florida at a rate of 2.5%.
Section 212.08(5), F .S., exempts from salestax certain items in agricultural use including materials used for shade,mulch or
protection from frost or insects on a farm and items used to contain or process agricultural commodities such as baling wire, window
cartons and twine for baling hay.
b. Proposed Change:
The sale or rental of agricultural machinery and equipment identified in s. 212.08(3), F .8., and cUlTentlytaxed at the rate of
2.5% would be exempt from salestax.
Additional items in agricultural use would be exempted, including materials used for protection from weather and pests and
wire wraps, bags, and twine used for baling forage.
SEcrlON 2: DESCRIPTION DATA & SoURCES
DOR Property Tax Adminis1ration, Tax Rolls -Taxable Value ofTPP for 1995 and 1997
IRS, Class Life Tables -Federal Depreciation Periods
US Industrial Outlook -Value ofProduct Shipments and Net Exports
DOR Sales Tax Data
SEcrlON 3: ASSUMPTIONS RATIONALE
-Taxable Value ofTPP equals Net Book Value and averages50% of original value (i.e. purchaseprice)
-Purchases of TPP are made evenly throughout the year, resulting in newly acquired TPP to be depreciatedat half of the
annual depreciation charge during the year of its acquisition
-Retirement of TPP is negligible, resulting in net additions to be equal to purchases
-Power-drawn, power-driven. and self-propelled faml equipment covers approximately 80% of the value of agricultural
-All power-drawn. power-driven, and self-propelled farm equipment is covered by the exemption
-Florida's share of the value offarm machinery equipment amountsto 5%
-Annual rental/lease value amounts to 10% of the original equipment value
-Growth in taxable salesfor agricultural equipment is 3% per year.
Salestax dealers are required to report the taxable salesoffalm machinery and equipment taxed at the 2.5% rate. However,
this information is required to be recorded on the back of the form and is not associatedwith taxes collected from such sales. Taxes
are grouped and reported as a single entry with taxes collected at other tax rates. Salesreported for calendar 1999 were $148 million,
implying taxes collected of $3.7 million at a 2.5% rate. This figure appearssmall, however, in light of other information and the lack
of importance that the taxable salesfield on the salestax form be filled in correctly. This analysisrelies on other information as
described for the estimate.
The additional items exempted in s. 212.08(5), F.S., including certain baling materials and ground covers would result in an
insignificant loss of salestax revenue.
SEcrION 4: METHODOLOGY
Additions to TPP are estimatedby ( 1) comparing the 1997 value of TPP reported on the tax rolls to the value of TPP
calculated based on the depreciation of the TPP reported on the 1997 tax rolls or (2) determining the value of product shipments of
agricultural M&E into Florida; the value ofleaseslrentals of exempt equipment is estimated by varying the assumptionregarding the
percentageofleased/rented equipment -using 10%,20%, and 30% to produce a low, medium, and high estimate.
SEcrION 5: IMPAcr SUMMARY (DETAILS ATTACHED)
IssUE: SalesTax Exemption for Certain Farm Equipment
BILLNUMBER(S): SB 1828
MONTH/YEAR COLLEcrION IMPACf BEGINs: JanUaIYI, 2002
DATE OFANALYSIs: March 22, 2001
State Impact -All Funds FY 200 1-02 Annualized FY 2001-02 FY 2001-02
Hi~ ( $12.5m) ( $S.2m) ( $12.8m)
Middle ($11.7m) ( $4.9m) ($12.Om)
Low ($10.9m) ( $4.6m) ($11.3m)
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Bill No: SB 1828
The bill would exempt from the sales tax the sale or rental of self propelled, power drawn and power driven farm equipment .
The sale and rental of such equipment is now taxed at 2.5%
1. Taxable Value of Tangible Personal Property Department of Revenue, Property Tax Administration. Tax Rolls
2. Depreciation Period Internal Revenue Service Class Life Tables
3. Value of Product Shipments US Industrial Outlook
1. Taxable value of TPP amounts to Net Book Value, which statewide and industrywide amounts to 50% of original value (purchase price)
2. Additions to TPP are made evenly throughout the year, resulting in a depreciation charge of one half the annual depreciation of that TPP
3. Retirement of TPP is negligible, resulting in edditions to TPP being equal to purchases of TPP
4. Florida's share of the value of farm machinery product shipments amounts to 5%
5. Lease/Rental charge amounts to 10% of the equipment value