Amends TCA Title 67.

This bill revises provisions governing the sales tax exemption for tangible personal property sold to qualified farmers or nurserymen, as discussed below. Under present law, the sale at retail, lease, rental, use, consumption, distribution, repair, storage for use or consumption in this state of a specified list of tangible personal property is exempted from sales tax when sold to a qualified farmer or nurseryman. That specified lists of items includes grain bins and attachments to grain bins; aircraft designed and used for crop dusting, such as an agracat or other similar airplanes that are designed for crop dusting purposes; equipment used exclusively for harvesting timber; and seeds, seedlings, plants grown from seed and liners or cuttings that will produce food or fiber, including tobacco, for human or animal consumption. This bill revises the above-described exemption to instead specify that sales tax will not be due from the sale at retail, lease, rental, use, consumption, distribution, repair, storage for use, or consumption in this state of the substances used for agriculture when sold to a qualified farmer or nurseryman. For purposes of the exemption, this bill defines agriculture as: (1) The land, buildings and machinery used in the commercial production of farm products and nursery stock; and (2) The activity carried on in connection with the commercial production of farm products and nursery stock. For purposes of the above: (1) "Farm products" means forage and sod crops; grains and feed crops; dairy and dairy products; poultry and poultry products; livestock, including breeding and grazing; fruits; vegetables; flowers; seeds; grasses; forestry products; fish and other aquatic animals used for food; bees; equine; and all other plants and animals that produce food, feed, fiber or fur; (2) "Nursery stock” means all trees, shrubs, or other plants, or parts of such trees, shrubs or other plants, grown or kept for, or capable of, propagation, distribution or sale on a commercial basis; and (3) "Substances" means items used for agriculture (including, but not limited to, materials, buildings, structures, fences, appliances, drugs, equipment, accessories, aircraft, computers, hardware, software, computer systems, warranties, technology, manuals, parts, hoses, pipes, appurtenances, labor, seeds, fertilizer, agri-sawdust, backup power infrastructure, pollution control, energy, water, chemicals, fluids, solvents, greases, heating and cooling systems, and machinery) and includes items that perform the actions of agriculture and items used for the maintenance and repair of substances used for agriculture, but does not include automobiles, trucks, household appliances, and gasoline or diesel used in vehicles operated upon the public highways of this state. This bill provides that substances are exempt from sales and use taxes whenever it is established to the satisfaction of the commissioner that they are predominantly used by a qualified farmer or nurseryman in agriculture. Whenever the commissioner determines that the use of substances by a qualified farmer or nurseryman meets such test, the commissioner will issue a notice regarding the entitlement to the exemption. A notice may be revoked by the commissioner upon a finding that the conditions precedent to the exemption no longer exist following a review by the government operations committees of the senate and the house of representatives meeting jointly or separately, or, alternatively, at the discretion of the chair of either of such committees, by a subcommittee of the government operations committees of the general assembly. Under present law, to be considered a "qualified farmer or nurseryman" a person must, among other things, be the owner or lessee of agricultural land from which $1,000 or more of agricultural products were produced and sold during the year, including payments from government sources. This bill changes the applicable dollar amount from $1,000 to $1,500. This bill specifies that it does not eliminate the tax-exempt status of any substance that is tax exempt on January 1, 2021. ON APRIL 27, 2022, THE SENATE ADOPTED AMENDMENT #1 AND PASSED SENATE BILL 905, AS AMENDED. AMENDMENT #1 changes the sales tax exemption from an exemption for the "sale at retail, lease, rental, use, consumption, distribution, repair, storage for use, or consumption in this state of the substances used for agriculture when sold to a qualified farmer or nurseryman" to an exemption for the sale at retail, lease, rental, use, consumption, distribution, repair, or storage for use or consumption in this state of tangible personal property that is subject to the sales tax when sold to a qualified farmer or nurseryman, if the tangible personal property is primarily used by the qualified farmer or nurseryman in agricultural operations. This amendment removes the definition of "substances". This amendment specifies that the sales tax exemption for farmers and nurserymen does not include automobiles, trucks, household appliances, and gasoline or diesel used in vehicles operated upon the public highways of this state. This amendment also specifies that the sales tax exemption for farmers and nurserymen does not exempt tangible personal property from the use tax imposed under present law on use or property produced or severed from the earth. This amendment changes this bill's effective date from July 1, 2021, to January 1, 2023.