15-6-202. Freeport merchandise and business inventories exemption -- definitions. (1) Freeport merchandise and business inventories are exempt from taxation.

(2) (a) "Freeport merchandise" means stocks of merchandise manufactured or produced outside this state that are in transit through this state and consigned to a warehouse or other storage facility, public or private, within this state for storage in transit prior to shipment to a final destination outside the state and that have acquired a taxable situs within the state.

(b) Stocks of merchandise do not lose their status as freeport merchandise because while in the storage facility they are assembled, bound, joined, processed, disassembled, divided, cut, broken in bulk, relabeled, or repackaged.

(c) A person seeking to qualify the person's property as freeport merchandise shall make application to the department in the manner prescribed by the department.

(3) (a) "Business inventories" include goods primarily intended for sale and not for lease in the ordinary course of business and raw materials and work in progress with respect to those goods. Except for farm implements and construction equipment described in subsection (3)(b), business inventories do not include goods that are leased or rented.

(b) Business inventories include farm implements as defined in 30-11-801 or construction equipment as defined in 30-11-901 that are held pursuant to a purchase incentive rental program.

(4) (a) For the purpose of subsection (3)(b), "purchase incentive rental program" means a program operated by a dealer of farm implements as defined in 30-11-801 or a dealer of construction equipment as defined in 30-11-901 under which the farm implement or construction equipment is owned by the dealership, held for sale, and rented to a single user of the farm implement or construction equipment as an incentive for the purchase of the property.

(b) A purchase incentive rental program does not include a farm implement or construction equipment that is:

(i) rented to a person for more than 9 months;

(ii) rented more than once to the same person; or

(iii) not owned by a farm implement dealership or construction equipment dealership.

(c) All farm implements and construction equipment in a purchase incentive rental program must be reported to the department each calendar quarter on a form provided by the department.