Lawmakers vote to exempt farmers from pesticide, fertilizer tax
PHOENIX — State lawmakers voted Monday to exempt farmers from having to pay sales taxes on the pesticides and fertilizers they put on the crops grown for food in Arizona.
The 32-28 vote by the full House came following pleas from lawmakers representing agricultural communities that it’s unfair to require those who grow food for Arizonans and people across the county to pay taxes on items they need. And Rep. Mark Finchem, R-Oro Valley, argued that the higher costs will be passed along to consumers, effectively making the tax paid by farmers a tax on the poor.
But the idea drew an angry reaction from several lawmakers who mentioned not just the loss of state tax revenues -- potentially up to $19 million -- but the idea that it would somehow reward farmers for the use of pesticides, insecticides, herbicides and fertilizers.
“We don’t want more chemicals in our food supply,’’ said Rep. Pamela Powers Hannley, D-Tucson, telling colleagues that one out of every 33 children born in Arizona has a birth defect. “I don’t want to encourage this.’’
What’s behind HB 2275 sponsored by Rep. Tim Dunn, R-Yuma, who is himself a farmer, is a ruling in January by the state Court of Appeals in a bid by Wilbur-Ellis Co., a California company, to get a refund of more than $8.3 million in taxes collected on the sale of fertilizers, pesticides and seeds sold in the state.
Arizona’s sales tax is actually a “transaction privilege tax,’’ levied on the business that makes the sale, though the costs normally are passed along to customers.
Company lawyers first argued that state law does exempt the sale of “propagative materials’’ from taxes.
Appellate Judge James Beene, writing for the unanimous court, acknowledged there is no definition in the statute of what is “propagative.’’ But he cited definitions that say these are things that reproduce, like parts of a bud, tuber, root or shoot used to reproduce the original plant.
“Neither fertilizers nor pesticides reproduce or multiply plants,’’ Beene wrote, even though they do make propagating more efficient.
The appellate judges were no more sympathetic to the company’s argument that the chemicals were being sold to farmers for resale.
What’s behind that argument is a recognized principle in Arizona law only the final transaction is taxable. So if something become part of a product that is resold, like sheet metal that becomes part of an air conditioner, the sale of the sheet metal is exempt from taxes.