Which horse, farm-equipment, trailer, and pickup sales were tax-exempt at a Texas farm auction?

Plain-English summary

The Texas Comptroller gave four main rules for an annual horse and farm-equipment auction.

• Horses were exempt from sales tax unless sold, leased, or rented as part of an amusement service.
• Machinery and equipment qualified under § 151.316(a)(7) only when used exclusively on a farm or ranch to build or maintain roads or water facilities, or to produce food, grass, animal feed, or agricultural products sold in the regular course of business.
• A trailer or semitrailer designed and used primarily as a farm or ranch vehicle for the listed production activities was exempt from motor vehicle tax. Nonqualifying trailer use was taxable.
• A standard pickup was not exempt as a farm vehicle, even when it had farm registration.

The seller needed a properly completed exemption certificate for exempt farm or ranch equipment. For motor vehicles, including trailers, the seller provided the title application/tax statement and the purchaser claimed the exemption with the county tax assessor.

What this means for you

Farmers, ranchers, and auctioneers

Equipment type alone did not establish exemption; exclusive or primary qualifying use mattered. Keep the exemption certificate and vehicle-title paperwork described in the letter.

Common questions

Q: Were horse sales taxable?

A: Not generally, unless they were part of an amusement service.

Q: Did farm registration exempt a pickup?

A: No. The letter expressly denied exemption to a standard pickup on that basis.

Q: When did a trailer qualify?

A: When designed and used primarily as a farm or ranch vehicle in the stated agricultural production activities.

Citations and references

• Rule 3.296(a)(1)(A)
• Tex. Tax Code § 151.316(a)(7)(A)-(D)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/200004162L

Original ruling text

April 3, 2000

To: **

Subject: Taxable sales

Dear **:

Thank you for your e-mail regarding the sale and auction of various farm and
ranch equipment.

Situation: As part of our annual horse sale, we are also having an auction
sale to sell various farm and ranch equipment.

Sales tax is not due on the sale, lease, or rental of horses except when sold,
leased, or rented as a part of an amusement service. See Rule 3.296 (a)(1)(A).

Question: Is the sale of farm and ranch equipment taxable?

Response: Texas Tax Code section 151.316(a)(7)(A)(B)(C)(D) provides an
exemption for machinery and equipment exclusively used or employed on a farm or
ranch in the building or maintaining of roads or water facilities or in the
production of:

(A) food for human consumption,
(B) grass,
(C) feed for animal life; or
(D) other agricultural products to be sold in the regular course of business

If you sell farm or ranch equipment that will not be used in an exempt manner,
you must collect sales and use tax.

Question: Is the sale of pickups and trailers taxable?

Response: A farm trailer is a trailer or semi-trailer designed and used
primarily as a farm and ranch vehicle. A farm trailer must be used in the
production of:

· food for human consumption,
· grass,
· feed for any form of animal life, or
· other livestock or agricultural products to be sold in the regular course of
business.

Farm trailers used primarily for farming and ranching, including the rearing of
poultry and use in feedlots, are exempt from motor vehicle tax. If the trailer
is not used in an exempt manner, motor vehicle sales tax is due.

A standard pick-up truck is not exempt from motor vehicle tax as a farm vehicle
even though it may have farm registration.

Question: What documentation must the buyer furnish us?

You will need to provide the purchaser of any motor vehicle (including
trailers) a title application/tax statement, form I30-U. This form indicates
the sales price. It is available on our web site at www.window.state.tx.us or
at your local County Tax Assessor's office.

You must obtain a properly completed exemption certificate for the sale of an
exempt piece of farm or ranch equipment.

The purchaser of a motor vehicle will file the statement with the county tax
assessor's office claiming any exemption at that time.

The Texas Tax Code is available on the Internet at:
http://capitol.tlc.state.tx.us/statutes/codes/TX000023.html.

A copy of rule 3.296 can be found on the Window on State Government web site at
www.window.state.tx.us. After clicking on "Texas Taxes," click on "The Sales
Tax" to get to the Comptroller's rules. You will want to click on "State Sales
Tax" under the Current Tax Rules index to find the sales tax rules.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion could change.

If you have any questions, please call me at 1-800-531-5441, extension 5-9913.
You may also write Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Elias Amaya
Tax Policy Division