Does a grower who hybridizes and sells lily bulbs grown from seed on their own land qualify for Utah's agricultural sales tax exemptions?

Plain-English summary

A grower who had spent years growing and hybridizing lily bulbs from seed on a three-year crop rotation asked the Utah State Tax Commission whether the business — not yet making sales but about to start — would be exempt from collecting sales tax as an agricultural enterprise. The grower emphasized this wasn't a nursery reselling purchased plants, but a true grow-from-seed-and-harvest operation, and pointed to a comparable flower-growing business that had operated under an agricultural exemption for five years.

The Commission confirmed several layers of exemption apply:

Agricultural producer status. Utah's horticultural specialty rules define an agricultural producer to include one primarily engaged in producing ornamental plants, nursery products (including bulbs), florists' greens, flowers, shrubbery, seeds and plants, trees, and sod. As a lily bulb producer, the grower qualifies.

Sales exemption for seasonal crops sold at harvest (§ 59-12-104(23)). Utah exempts the "exclusive sale of locally grown seasonal crops, seedling plants, or garden produce" when sold by the producer during harvest season. Assuming the lily bulbs are "seasonal" and the grower sells only qualifying agricultural produce (not other items), the sales can be made tax-free. But this is an exclusivity condition: if the bulbs are sold through a shop that also retails non-agricultural items, the whole operation is treated as a retailer, and sales tax must be collected on everything.

Equipment and supplies exemption (§ 59-12-104(22)). With two exceptions, a commercial agricultural producer can buy or lease equipment, machinery, supplies, and other tangible personal property used primarily and directly in agricultural production tax-free. The exceptions: vehicles that must be state-registered, and hand tools below a set unit-price threshold (redacted in this ruling). Examples given of tax-free purchases: irrigation equipment, seed/seedlings, fertilizer, and pest/disease/weed sprays and insecticides, plus materials to build an irrigation system or greenhouse. A specific carve-out: concrete is taxable at the point of sale even for agricultural use, but if used to build or line irrigation ditches, the producer can apply directly to the Tax Commission for a refund. Purchases for non-production activities — office equipment, janitorial supplies, sales/distribution equipment, or R&D — remain taxable.

Fuel and electricity exemption. Gas, electricity, heat, coal, fuel oil, and other fuels used in agricultural operations to produce an agricultural product are exempt — covering commercial greenhouses, irrigation pumps, off-highway farm machinery, and general farming activities, up through harvest or placing the product into storage. If a single meter serves both qualifying and non-qualifying uses, the exemption turns on whether the fuel/electricity is used predominately for the qualifying agricultural activity.

What this means for you

Growers and hybridizers selling crops they raise themselves

Growing a genuine crop from seed to harvest on your own land — as opposed to buying and reselling plants like a nursery — supports agricultural producer status. Selling that seasonal harvest directly, and only that produce, keeps the sale tax-exempt.

Growers who also sell non-agricultural merchandise

Watch the exclusivity trap: if you sell your qualifying crop through the same shop or operation that retails other, non-agricultural goods, the whole business is treated as a retailer for sales tax purposes — you lose the exemption on everything, not just the non-qualifying items.

Farmers and growers buying equipment, fuel, or supplies

Most production-related purchases (irrigation systems, greenhouses, fertilizer, sprays, seed) are tax-free, but registered vehicles and low-cost hand tools are not, and anything used for non-production functions (office, sales, R&D) stays taxable. If you have shared metering for fuel/electricity across qualifying and non-qualifying uses, the exemption depends on which use predominates.

Accountants and tax professionals

This ruling is a useful checklist for agricultural producer exemptions in Utah: producer-status definition, the harvest-season sales exemption's exclusivity condition, the equipment/supplies exemption with its two carve-outs, the concrete-for-irrigation-ditch refund mechanism, and the predominant-use rule for shared utility metering.

Common questions

Q: I grow a crop from seed on my own land and sell only that crop during harvest season — is that tax-free?
A: Based on this ruling and § 59-12-104(23), yes, as long as your sales are the exclusive sale of that qualifying, locally grown seasonal produce and made by you as the producer during harvest season.

Q: I sell my crop alongside other retail merchandise in the same shop — does that affect my exemption?
A: Yes — the Commission found that selling through a shop that also retails non-agricultural items makes the whole operation a retailer required to collect tax on all sales, not just the crop.

Q: Can I buy my irrigation system, greenhouse materials, and fertilizer tax-free?
A: Generally yes, as items used primarily and directly in agricultural production — with the exception of registered vehicles and low-cost hand tools, which remain taxable.

Q: What about concrete used for an irrigation ditch?
A: Concrete is taxable at the point of sale even for this use, but if it's used to build or line an irrigation ditch, the producer can apply directly to the Tax Commission for a refund.

Q: Is the electricity for my greenhouse exempt?
A: Yes, if used in agricultural operations to produce an agricultural product, including commercial greenhouses, irrigation pumps, off-highway farm machinery, and farming activities up through harvest or storage. If one meter covers both qualifying and non-qualifying use, the exemption depends on which use predominates.

Citations and references

Statutes:

• Utah Code Ann. § 59-12-104(23) (seasonal crop/seedling/garden produce sales exemption for producers during harvest season)
• Utah Code Ann. § 59-12-104(22) (agricultural producer equipment/supplies exemption, excluding registered vehicles and low-cost hand tools)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/96-115.htm

Original ruling text

96-115

Response
July 22, 1996

Response

XXXXX

Utah
State Tax Commission

210
N. 1950 W.

Salt
Lake City, UT 84134-0400

Dear
XXXXX

It
was suggested to me to write to you for an �advisory opinion� on my business, which
is called XXXXX. We have not yet begun to make sales with this business, but we
hope to soon. For many years, I have been growing lily bulbs from seeds and
hybridizing them. I hope to begin sales to the public, using a three year crop
rotation as a farming plan. Several years ago, I was told by someone at the tax
commission that such a business would be exempt from collecting sales tax, as
it would appear to be an agricultural enterprise. We grow a crop from seed on
our own land, and then intend to pass the harvest along to the public. In
strength of my position, I would point to another business, XXXXX. This
business does just what I intend to do -- only the flower crop is different.
This business has been operated under an agricultural exemption for the past
five years. Finally, I would like to reiterate that we are not a nursery. We do
not buy plants and re-sell them. We grow a crop from seed and harvest the bulbs
at the end of a three year period.

Thanks
for your attention to this matter. I would like to have it on record whether or
not we are exempt from collecting sales tax.

Thanks
Again,

XXXXX

XXXXX

Advisory
Opinion - Application of sales tax to sales of lilies.

Dear
XXXXX

We have received your request for information
regarding sales tax on your sales of lilies grown as a crop on your land. We find as follows:

Utah law provides certain sales tax
exemptions that pertain to purchases or sales by agricultural producers. With regard to horticultural specialty
trades, an agricultural producer is one primarily engaged in the production of
ornamental plants, nursery products such as bulbs, florists� greens, flowers,
shrubbery, flower and vegetable seeds and plants, trees and sod. As a producer of lily bulbs, you qualify as
an agricultural producer.

Utah sales tax law extends a sales
tax exemption on the �exclusive sale of locally grown seasonal crops, seedling
plants, or garden . . . produce if sold by a producer during the harvest
season. �59-12-104 (23) Utah Code
Ann. Assuming that your bulbs are
�seasonal� and also assuming that you do not sell anything other than the bulbs
or other qualifying agricultural produce, you may sell tax free. If you are selling through a shop which
retails non-agricultural items, you are considered a retailer. In that case, you must collect sales tax on
all sales.

With two exceptions, a commercial
agricultural producer may purchase or lease equipment, machinery, supplies and
other tangible personal property used or consumed primarily and directly in
agricultural production operations tax free.
The two exceptions are purchases of vehicles which must, under the laws
of this state, be registered, and hand tools with a unit price of less than
$$$$$. �59-12-104 (22) Utah Code Ann.

Examples of items that may be
purchased tax free include irrigation equipment, seed or seedlings, fertilizer,
and sprays and insecticides used in the commercial production of plants to
control insects, diseases or weeds.
Materials and supplies used to construct an irrigation system or
greenhouse may also be purchased tax free.
However, purchases of concrete are taxable at the point of sale. If the concrete is used to build or line
irrigation ditches, the agricultural producer may apply directly to the Tax
Commission for a refund.

Items purchased for use in
activities that are not directly related to agricultural production may not be
purchased tax exempt. For instance,
purchases of office equipment, janitorial supplies, equipment used in the sales
or distribution operations, and equipment or supplies used in research or
development are all taxable.

You may also qualify for an
exemption on electricity or other fuels used in your agricultural
activities. Purchases of gas,
electricity, heat, coal, fuel oil or other fuels is exempt from sales tax if
used in agricultural operations to produce an agricultural product, including
uses in:

. commercial
greenhouses,

. irrigation
pumps,

. off-highway
farm machinery, and

. farming
activities.

The exemption extends to use for
production activities up to the time of harvest or placing the product into a
storage facility. If the electricity or
gas for both qualifying and non- qualifying activities is delivered to a single
location through a single meter, the determination of whether it qualifies for
exemption depends upon whether the electricity or fuel is used predominately
for qualifying activities.

Please contact us again if you have
other questions.

For
the Commission,

Alice
Shearer,

Commissioner