Colorado Legislative Council Staff



(replaces fiscal impact March 4, 1999)

Drafting Number:

Prime Sponsor(s):

LLS 99-0030

Rep. Alexander

Sen. Musgrave


Bill Status:

Fiscal Analyst:

April 15, 1999

Senate Appropriations

Harry Zeid (866-4753)



Fiscal Impact Summary

FY 1999/2000

FY 2000/2001

State Revenues

General Fund



State Expenditures

General Fund



FTE Position Change

0.0 FTE

0.0 FTE

Other State Impact: TABOR Impact; SB97-1 Sales Tax Transfer Impact

Effective Date: July 1, 1999

Appropriation Summary for FY 1999-2000: None

Local Government Impact: Statutory cities and counties may exempt sales tax on farm equipment by adoption of a sales tax ordinance or resolution.

Summary of Legislation

            This bill, as amended in the Senate Finance Committee, permanently creates a state sales and use tax exemption for farm equipment purchased and sold on or after July 1, 1999. Farm equipment would be defined to mean farm tractors, implements of husbandry, and irrigation equipment having a per unit or per system purchase price of at least $1,000. Farm equipment also includes attachments, and bailing wire, binders twine, and surface wrap used primarily and directly in any farm equipment regardless of price. The sales and use tax exemption would also apply to farm equipment under lease if the fair market value of the equipment is at least $1,000 and the equipment is for use primarily and directly in any farm operation. Statutory cities and counties would continue to collect sales tax of farm equipment unless specifically exempted by the adoption of a sales tax ordinance or resolution.

            The bill reduces state General Fund revenues and certain local governments would be authorized to exempt sales tax on farm equipment. Therefore, the bill is assessed as having state and local fiscal impact. The bill would become effective July 1, 1999

State Revenues

            The Standard Industrial Classification (SIC) is the statistical classification standard underlying all establishment-based Federal economic statistics classified by industry. SIC Code 5083, Farm and Garden Machinery and Equipment, is the category used for establishments primarily engaged in the wholesale distribution of agricultural machinery and equipment for use in the preparation and maintenance of the soil, the planting and harvesting of crops, and other operations and processes pertaining to work on the farm or lawn or garden, as well as dairy and other livestock equipment. Based on reported net taxable sales for this industry classification, the sales and use tax collected in FY 1997-98 from retail establishments in this SIC category in Colorado was $3,694,644. The sales tax exemption for repair parts used in the repair or maintenance of exempt farm equipment was amended out of the introduced version of the bill. The Farm Dealer Association reports that 11 percent of farm and machinery equipment sold is for repair parts. The revenue reduction estimate has been reduced accordingly.

            Including industry growth and inflation, it is projected that state sales tax revenue reductions that would occur by exempting farm equipment from the imposition of state sales and use tax will be $3,488,486 in FY 1999-00, and $3,596,629 in FY 2000-01.

State Expenditures

            State expenditures would be unaffected by the bill.

Other State Impacts

            Under current law, SB97-1 requires the diversion of 10 percent of sales tax revenues to the Highway User Tax Fund for use on highway projects. This bill will reduce state sales tax revenues beginning in FY 1999-00, and will therefore, reduce the amount of state funds available for the SB 97-1 diversion. Additionally, the reduced state revenues will mean a reduction of the amount of future state funds required to be refunded to taxpayers under the terms of TABOR. Table 1. summarizes the net impact of this bill on these state obligations. The changes in Table 1. are changes from a base that includes continuing capital construction projects.

Table 1 Additional Impact of HB 99-1002 (millions of dollars)


FY 1999-00

FY 2000-01

General Fund Revenue

SB 97-1 Diversion

Excess General Fund Reserve

Federal Income Taxes Paid by Colorado Taxpayers

TABOR Refund (from prior year)











Local Government Impact

            Statutory cities and counties would continue to collect sales tax of farm equipment unless specifically exempted by the adoption of a sales tax ordinance or resolution. They would be authorized to exempt sales tax on farm equipment if they choose.

State Appropriations

            The fiscal note implies that no new spending authority or appropriations are required for FY 1999-00 to implement the bill.

Departments Contacted

            Revenue          Legislative Council Staff