LEGISLATIVE FISCAL OFFICE
Fiscal Note ACT 53
Fiscal Note On: SB 6 SLS 21RS 114
Bill Text Version: ENROLLED
Opp. Chamb. Action:
Proposed Amd.:
Sub. Bill For.:
Date: June 9, 2021 11:51 AM Author: CATHEY
Dept./Agy.: Revenue
Subject: Exemption: Utilities by Commercial Farmers Analyst: Benjamin Vincent
TAX/SALES EN DECREASE GF RV See Note Page 1 of 1
Exempts purchases of utilities used by commercial farmers for on-farm storage from state sales and use tax. (gov sig)
Current law defines “commercial farmers” and exempts certain commercial farmer purchases from state sales and use tax,
including diesel fuel, butane, propane and other liquefied petroleum gases, and materials used in the construction of facilities
for storing food and fiber for agricultural manufacturing.
Current law taxes sales of water, electricity, natural gas, and other energy sources for nonresidential use at a total state
rate of 2% through June 30, 2025, at which time these purchases will become fully exempt.
Proposed law fully exempts nonresidential utilities purchased by commercial farmers for use in separately-metered Louisiana
facilities that contain raw agricultural commodities, including feed, seed, and fertilizer.
Effective October 1, 2021.
EXPENDITURES 2021-22 2022-23 2023-24 2024-25 2025-26 5 -YEAR TOTAL
State Gen. Fd. SEE BELOW $0 $0 $0 $0 $0
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total $0 $0 $0 $0 $0
REVENUES 2021-22 2022-23 2023-24 2024-25 2025-26 5 -YEAR TOTAL
State Gen. Fd. DECREASE DECREASE DECREASE DECREASE
Agy. Self-Gen. $0 $0 $0 $0 $0 $0
Ded./Other $0 $0 $0 $0 $0 $0
Federal Funds $0 $0 $0 $0 $0 $0
Local Funds $0 $0 $0 $0 $0 $0
Annual Total $0 $0
EXPENDITURE EXPLANATION
LDR reports that modifying the current set of suspended exemptions will require minor expenditures for tax return form
redesign, and for computer system modification, development, and testing.
REVENUE EXPLANATION
Current law subjects purchases of nonresidential utilities made by commercial farmers to a 2% state sales tax rate until June
30, 2025, at which time these purchases will become fully exempt. Proposed law would fully exempt purchases of utilities by
commercial farmers from state sales tax, when the utilities are used for certain separately-metered on-farm storage facilities
or containers.
Reliable data on the magnitude of these purchases is not available. An initial estimate of total consumption by farms and
other food manufacturers likely to utilize such facilities implies statewide taxable purchases of approximately $220M
annually. A 2% exemption for these purchases would imply a revenue impact of approximately $4.4M. As proposed law
specifies that only utilities in support of the storage phase are intended to be exempted, this figure represents an upper
bound of the proposed law’s revenue impact.
However, LDR reports that the administration of some aspects of the bill that appear to limit eligibility for the exemption
would be problematic. For example, it is not clear how the exemption would apply for individual facilities that store and
process raw agricultural commodities. Additionally, the extent to which eligible activity is already exempt from sales tax is
not known, as presumably some already-exempted fuel sources such as butane or propane are currently used for these
purposes.
Proposed law can only serve to reduce general fund revenues for FY22-FY25. Current law provides that these purchases will
be exempt for FY26 and beyond.
The precise impact of proposed law will depend on the extent to which fuel sources that are already exempt are currently in
use, the ability of farmers and utilities providers to correctly meter exempt and taxable utilities usage, and the actual
proportion of commercial farm utilities consumed in the storage process. If only 11% of the upper bound revenue loss were
realized, the exemption would approximate $500,000 per year.
Senate Dual Referral Rules House
13.5.1 >= $100,000 Annual Fiscal Cost {S & H} 6.8(F)(1) >= $100,000 SGF Fiscal Cost {H & S}
Gregory V. Albrecht
x 13.5.2 >= $500,000 Annual Tax or Fee 6.8(G) >= $500,000 Tax or Fee Increase
Change {S & H} Chief Economist
or a Net Fee Decrease {S}