Print Friendly HOUSE BILL NO. 561
– Sales tax, production exemption
HOUSE BILL NO. 561
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H0561...............................................by REVENUE AND TAXATION
SALES TAX - PRODUCTION EXEMPTION - Amends existing law to provide that the
production exemption from sales and use tax shall be available to a
business or separately operated segment of a business engaged in the
business of processing materials, substances or commodities for use as fuel
for the production of energy.
02/26 House intro - 1st rdg - to printing
02/27 Rpt prt - to Rev/Tax
02/29 Rpt out - rec d/p - to 2nd rdg
03/03 2nd rdg - to 3rd rdg
03/05 3rd rdg - PASSED - 60-10-0
AYES -- Anderson, Andrus, Barrett, Bayer, Bedke, Bilbao, Black,
Block, Bock, Bolz, Bowers, Brackett, Bradford, Chadderdon, Chavez,
Chew, Clark, Collins, Crane, Durst, Eskridge, Hagedorn, Hart,
Harwood, Henderson, Killen, Kren, Labrador, Lake, Loertscher, Luker,
Marriott, Mathews, McGeachin, Mortimer, Moyle, Nielsen, Nonini,
Patrick, Raybould, Roberts, Ruchti, Rusche, Sayler, Schaefer,
Shepherd(02), Shepherd(08), Shirley, Shively, Smith(24), Snodgrass,
Stevenson, Thayn, Thomas, Trail, Vander Woude, Wills, Wood(27),
Wood(35), Mr. Speaker
NAYS -- Bell, Boe, Henbest, Jaquet, King, LeFavour, Pasley-Stuart,
Pence, Ringo, Smith(30)
Absent and excused -- None
Floor Sponsor - Clark
Title apvd - to Senate
03/06 Senate intro - 1st rdg - to Loc Gov
03/13 Rpt out - rec d/p - to 2nd rdg
03/14 2nd rdg - to 3rd rdg
03/17 3rd rdg - PASSED - 27-7-1
AYES -- Andreason, Bair, Bastian, Bilyeu, Broadsword, Cameron,
Coiner, Darrington, Davis, Fulcher, Geddes, Goedde, Hammond,
Heinrich, Hill, Jorgenson, Keough, Lodge, Malepeai(Sagness), McGee,
McKague, McKenzie, Pearce, Richardson, Schroeder, Siddoway, Stegner
NAYS -- Burkett, Corder, Kelly, Langhorst, Little, Stennett, Werk
Absent and excused -- Gannon
Floor Sponsor - McKenzie
Title apvd - to House
03/18 To enrol - Rpt enrol - Sp signed
03/19 Pres signed - To Governor
03/24 Governor signed
Session Law Chapter 233
]]]] LEGISLATURE OF THE STATE OF IDAHO ]]]]
Fifty-ninth Legislature Second Regular Session - 2008
IN THE HOUSE OF REPRESENTATIVES
HOUSE BILL NO. 561
BY REVENUE AND TAXATION COMMITTEE
1 AN ACT
2 RELATING TO THE PRODUCTION EXEMPTION; AMENDING SECTION 63-3622D, IDAHO CODE,
3 TO PROVIDE THAT THE PRODUCTION EXEMPTION FROM SALES AND USE TAX SHALL BE
4 AVAILABLE TO A BUSINESS, OR SEPARATELY OPERATED SEGMENT OF A BUSINESS,
5 ENGAGED IN THE BUSINESS OF PROCESSING MATERIALS, SUBSTANCES OR COMMODITIES
6 FOR USE AS FUEL FOR THE PRODUCTION OF ENERGY, WHETHER AS A SUBCONTRACTOR,
7 CONTRACTOR, CONTRACTEE OR SUBCONTRACTEE, WITHOUT REGARD TO THE OWNERSHIP
8 OF THE MATERIALS, SUBSTANCES OR COMMODITIES BEING PROCESSED AND IRRESPEC-
9 TIVE OF WHETHER THE MATERIALS, SUBSTANCES OR COMMODITIES BEING PROCESSED
10 ARE INTENDED FOR ULTIMATE SALE AT RETAIL WITHIN OR WITHOUT THIS STATE.
11 Be It Enacted by the Legislature of the State of Idaho:
12 SECTION 1. That Section 63-3622D, Idaho Code, be, and the same is hereby
13 amended to read as follows:
14 63-3622D. PRODUCTION EXEMPTION. There are exempted from the taxes imposed
15 by this chapter:
16 (a) The sale at retail, storage, use or other consumption in this state
18 (1) Tangible personal property which will enter into and become an ingre-
19 dient or component part of tangible personal property manufactured, proc-
20 essed, mined, produced or fabricated for sale.
21 (2) Tangible personal property primarily and directly used or consumed in
22 or during a manufacturing, processing, mining, farming, or fabricating
23 operation, including, but not limited to, repair parts, lubricants,
24 hydraulic oil, and coolants, which become a component part of such tangi-
25 ble personal property; provided that the use or consumption of such tangi-
26 ble personal property is necessary or essential to the performance of such
28 (3) Chemicals, catalysts, and other materials which are used for the pur-
29 pose of producing or inducing a chemical or physical change in the product
30 or for removing impurities from the product or otherwise placing the prod-
31 uct in a more marketable condition as part of an operation described in
32 subsection (a)(2) of this section, and chemicals and equipment used in
33 clean-in-place systems in the food processing and food manufacturing
35 (4) Safety equipment and supplies required to meet a safety standard of a
36 state or federal agency when such safety equipment and supplies are used
37 as part of an operation described in subsection (a)(2) of this section.
38 (5) Plants to be used as part of a farming operation.
39 (b) Other than as provided in subsection (c) of this section, the exemp-
40 tions allowed in subsections (a)(1), (a)(2), (a)(3) and (a)(4) of this section
41 are available only to a business or separately operated segment of a business
42 which is primarily devoted to producing tangible personal property which that
43 business will sell and which is intended for ultimate sale at retail within or
1 without this state. A contractor providing services to a business entitled to
2 an exemption under this section is not exempt as to any property owned,
3 leased, rented or used by it unless, as a result of the terms of the contract,
4 the use of the property is exempt under section 63-3615(b), Idaho Code.
5 (c) The exemptions allowed in subsections (a)(1), (a)(2), (a)(3) and
6 (a)(4) of this section shall also be available to a business, or separately
7 operated segment of a business, engaged in farming or mining, whether as a
8 subcontractor, contractor, contractee or subcontractee, when such business or
9 segment of a business is primarily devoted to producing tangible personal
10 property which is intended for ultimate sale at retail within or without this
11 state, without regard to the ownership of the product being produced.
12 (d) The exemptions allowed in subsections (a)(1), (a)(2), (a)(3) and
13 (a)(4) of this section shall also be available to a business, or separately
14 operated segment of a business, engaged in the business of processing mate-
15 rials, substances or commodities for use as fuel for the production of energy,
16 whether as a subcontractor, contractor, contractee or subcontractee, without
17 regard to the ownership of the materials, substances or commodities being
18 processed and irrespective of whether the materials, substances or commodities
19 being processed are intended for ultimate sale at retail within or without
20 this state.
21 (e) As used in this section, the term "directly used or consumed in or
22 during" a farming operation means the performance of a function reasonably
23 necessary to the operation of the total farming business, including, the
24 planting, growing, harvesting and initial storage of crops and other agricul-
25 tural products and movement of crops and produce from the place of harvest to
26 the place of initial storage. It includes disinfectants used in the dairy
27 industry to clean cow udders or to clean pipes, vats or other milking equip-
29 ( ef) The exemptions allowed in this section do not include machinery,
30 equipment, materials and supplies used in a manner that is incidental to the
31 manufacturing, processing, mining, farming or fabricating operations such as
32 maintenance and janitorial equipment and supplies.
33 ( fg) Without regard to the use of such property, this section does not
35 (1) Hand tools with a unit purchase price not in excess of one hundred
36 dollars ($100). A hand tool is an instrument used or worked by hand.
37 (2) Tangible personal property used in any activities other than the
38 actual manufacturing, processing, mining, farming or fabricating opera-
39 tions such as office equipment and supplies, and equipment and supplies
40 used in selling or distributing activities.
41 (3) Property used in transportation activities.
42 (4) Machinery, equipment, tools or other property used to make repairs.
43 This subsection does not include repair parts that become a component part
44 of tangible property exempt from tax under this section or lubricants,
45 hydraulic oil, or coolants used in the operation of tangible personal
46 property exempt under this section.
47 (5) Machinery, equipment, tools or other property used to manufacture,
48 fabricate, assemble or install tangible personal property which is:
49 (i) Not held for resale in the regular course of business; and
50 (ii) Owned by the manufacturer, processor, miner, farmer or fabrica-
52 provided, however, this subsection does not prevent exemption of machin-
53 ery, equipment, tools or other property exempted from tax under subsection
54 (a)(2) or (a)(3) of this section.
55 (6) Any improvement to real property or fixture thereto or any tangible
1 personal property which becomes or is intended to become a component of
2 any real property or any improvement or fixture thereto.
3 (7) Motor vehicles and aircraft.
4 (8) Tangible personal property used or consumed in processing, producing
5 or fabricating tangible personal property exempted from tax under this
6 chapter in sections 63-3622F and 63-3622I, Idaho Code.
7 (9) Tangible personal property described in section 63-3622HH, Idaho
9 ( gh) Any tangible personal property exempt under this section which
10 ceases to qualify for this exemption, and does not qualify for any other
11 exemption or exclusion of the taxes imposed by this chapter, shall be subject
12 to use tax based upon its value at the time it ceases to qualify for exemp-
13 tion. Any tangible personal property taxed under this chapter which later
14 qualifies for this exemption shall not entitle the owner of it to any claim
15 for refund.
STATEMENT OF PURPOSE
This legislation amends section 63-3622D, Idaho Code, to
include processing materials for the production of energy.
This proposed legislation would be revenue-neutral to the
Name: Senator Hill
Senator Geddes, Senator Davis, Senator Hill, Senator Siddoway,
Senator Richardson, Sen Bair, Representative Lake, Representative
Bedke, Representative Marriott, Representative McGeachin,
Representative Mortimer, Representative Mathews, Representative
Shirley, Representative Raybould, Representative Moyle
STATEMENT OF PURPOSE/FISCAL NOTE H 561