Does Utah's sales tax exemption for 'locally grown' seasonal crops apply to an out-of-state farm's sales into Utah?

Plain-English summary

An out-of-state sod farm had sold commercially grown sod to Utah customers for years, collecting Utah sales tax. At one point the Tax Commission itself told the farm sod was exempt and cancelled its sales tax number — but a later audit reversed course, and the Commission told the farm to resume collecting tax (without seeking three years of back tax, given its own earlier misdirection). The farm's attorney asked the Commission to clarify the scope of the "locally grown" seasonal-crop exemption: does "locally grown" mean grown within Utah's borders, or does it turn on geographic proximity regardless of state lines? The farm argued a strict in-state reading would be an odd and arguably unconstitutional way to draw the line — for example, a Utah county might be much farther from a particular Utah-based producer than from an out-of-state producer just across the border, yet only the in-state one would qualify.

The Commission held that "locally grown" means grown within Utah's state boundaries, full stop — the Legislature intended the exemption to exclude crops grown outside Utah, regardless of how close the out-of-state farm might be. On the commerce-clause argument, the Commission didn't dispute or accept the constitutional claim — it said flatly that it lacks jurisdiction to rule on the constitutionality of a statute enacted by the Legislature. Its duty is to enforce the law as written unless and until the Legislature amends it or a court with the authority to do so declares it unconstitutional.

What this means for you

Out-of-state farmers and agricultural producers selling into Utah

Don't assume your farm's sod, produce, or seasonal crops qualify for Utah's harvest-season exemption just because you're geographically close to the Utah border or actively selling into the state — the exemption is read as strictly in-state-grown. You should be collecting and remitting Utah sales tax on those sales unless a court or legislative change alters this reading.

Utah farmers and producers

The exemption remains available to you specifically because your crops are grown within Utah's boundaries — this ruling confirms the Commission's narrow, geography-based reading works in your favor as an in-state producer.

Accountants and tax professionals

Note the Commission's institutional posture here: it won't entertain a commerce-clause challenge to a statute in a private letter ruling, regardless of the argument's merits, because it considers that question outside its jurisdiction. A taxpayer wanting to challenge "locally grown" on constitutional grounds would need to pursue that in a court with jurisdiction to decide it, not through the ruling process.

Common questions

Q: What does "locally grown" mean under Utah's seasonal-crop exemption?
A: Grown within the state boundaries of Utah — not merely nearby or within a reasonable driving distance regardless of state lines.

Q: Can an out-of-state farm ever qualify for this exemption on sales into Utah?
A: Not under the Commission's current interpretation — the crop itself must have been grown within Utah.

Q: Did the Commission address whether this interpretation violates the Commerce Clause?
A: No — the Commission said it has no jurisdiction to determine the constitutionality of a legislative enactment and must enforce the law as written.

Q: Can another out-of-state producer rely on this ruling?
A: No — it binds the Commission only for the taxpayer and facts presented. It does reflect the Commission's general reading of the statute, but is not binding precedent for anyone else.

Citations and references

Statutes:

• Utah Code Ann. § 59-12-104(21) (exemption for the exclusive sale of locally grown seasonal crops, seedling plants, or garden, farm, or other agricultural produce sold by a producer during harvest season)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/99-032.htm

Original ruling text

REQUEST LETTER

99-032

April 1,1999

RE: Request for Advisory Opinion on Utah Code Ann. 1 59-12-104(22)

Dear Commissioners;

I represent COMPANY ("COMPANY"), a sod farm located in CITY, STATE. COMPANY grows and sells sod commercially, and makes a substantial portion of its sales to Utah-based customers. COMPANY has been selling sod in Utah for many years. For the first several years, COMPANY collected Utah sales tax. Approximately three years ago, the Utah State Tax Commission informed COMPANY that sod was exempt from sales tax and that COMPANY should stop collecting it. The Tax Commission went so far as to cancel COMPANY's sales tax number. Recently, the Tax Commission conducted an audit of COMPANY, due to its failure to collect sales tax. When COMPANY explained the Tax Commission's previous actions, the Tax Commission decided against requiring reimbursement for the previous three years, but informed COMPANY that it must resume collecting sales tax.

COMPANY seeks your guidance on the applicability to out-of-state entities of the Utah state sales tax exemption found in Utah Code Ann. 1 59-12..104(~") That subsection provides an exemption for:

[E]xclusive sale of locally grown seasonal crops, seedling plants, or garden, farm, or other agricultural produce is sold by a producer during the harvest season[.]

It is unclear what is the exact scope of the subsection's language "locally grown." The scope of such language could plausibly correspond to: (1) within state boundaries; or (2) a reasonable distance regardless of state boundaries. An interpretation holding "locally grown" to correspond with "in state" would be anomalous in several scenarios. One (as would be the case with my client) is where a STATE company making sales to COUNTY would not be considered "local," while a COUNTY vendor would Arguably, for purposes of COUNTY purchasers, a CITY STATE vendor is much more 'local" than a CITY vender. Also, an "in state" definition would do little to resolve the situation where a vendor sells products grown on land straddling state boundaries. Finally, an "in state" definition would probably violate the commerce clause, the privileges and immunities clause and/or the equal protection clause of the U.S. Constitution by discriminating against interstate commerce and nonresidents of Utah. On the other hand, an interpretation holding "locally grown" to be a function of distance rather than state boundaries is probably too indefinite to be enforceable, since it does not indicate the exact distance or scope needed to be "local."

Therefore, my client seeks an advisory opinion from you regarding the scope and meaning of the phrase "locally grown" as used in Utah Code Ann. 1 59-12-104(22), and how such scope and meaning applies to out-of-state entities making sales to Utah purchasers. Any guidance you can provide will be most welcome.

Sincerely,

NAME

RESPONSE LETTER

May 9, 2000

RE: Sales Tax Exemption for Locally Grown Seasonal Crops

Dear NAME,

On behalf of your client, COMPANY, you have requested an advisory opinion regarding the scope and meaning of the phrase "locally grown" as used in Utah Code Ann. '59-12-104(22) and how the term is applied to out-of-state entities making sales to Utah purchasers. COMPANY is a sod farm located in CITY STATE, that grows and sells sod commercially, with a substantial portion of its sales made to Utah-based customers. The Auditing Division of the Utah State Tax Commission has recently informed COMPANY that it should collect sales tax on its sales made to Utah customers.

Section 59-12-104(21) provides an exemption from Utah sales and use tax for the "exclusive sale of locally grown seasonal crops, seedling plants, or garden, farm, or other agricultural produce is sold by a producer during the harvest season[.]" The Tax Commission believes that, for purposes of the exemption, the Legislature intended the term "locally grown" to be interpreted to include those seasonal crops grown within the boundaries of Utah but to exclude those seasonal crops grown outside the state's boundaries.

You state that such an interpretation impermissibly discriminates against interstate commerce and, thus, violates the commerce clause of the U.S. Constitution. Whether this is true or not, the Tax Commission does not have the jurisdiction to determine the constitutionality of laws enacted by the Legislature. Instead, the Tax Commission has a duty to enforce any law enacted by the Legislature. Until the Legislature changes the law or a court that has jurisdiction declares the law unconstitutional, the Tax Commission is required to enforce the law as intended by the Legislature.

Please contact us if you have any other questions.

For the Commission,

Marc B. Johnson

Commissioner