Colorado Legislative Council Staff

STATE and LOCAL

REVISED FISCAL IMPACT

(replaces fiscal impact dated March 18, 1999)

TITLE:            CONCERNING AN EXEMPTION OF SUBSTANCES PROVIDED TO LIVESTOCK FROM THE STATE SALES AND USE TAX.

Summary of Legislation

            This bill, as amended in the Senate Finance Committee, would permanently exempt agricultural compounds used to promote the health of livestock and semen used for agricultural or ranching purposes from the state sales and use tax.

State Revenues

            The bill would permanently exempt all sales and purchases of agricultural compounds to be consumed by, administered to, or otherwise used in caring for livestock and all sales and purchases of semen for agricultural or ranching purposes. Agricultural compounds would be defined to include insecticides, fungicides, growth-regulating chemicals, vaccines, hormones, and drugs used for the prevention or treatment of disease or injury in livestock.

            The items to be exempted by the bill are found in three Standard Industrial Classification (SIC) codes:

            •   Code 2879 (pesticides and agricultural chemicals, not elsewhere classified) includes insecticides, fungicides, and growth-regulating chemicals);

            •   Code 0751 (livestock services, except veterinary) includes artificial insemination services for livestock and breeding of livestock); and

            •   Code 5159 (semen, bovine, wholesale).

            It is estimated that, for these three SIC codes, $134,402 in state sales tax revenues would be exempted annually as a result of the bill. Further research conducted by the Department of Revenue indicates that in addition to the information for these SIC codes, $480,000 in sales tax was paid by companies that fit the criteria for exemption provided by the bill, but that are classified under industries other than those listed in the three SIC codes noted above. It is likely that a large portion, but not all, of the sales tax paid by these companies would be exempted by the bill. For purposes of this fiscal note, it is assumed that the value of the sales tax exemption is $500,000 annually beginning in FY 1999-00.

State Expenditures

            The bill does not require any state expenditure.

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.