Were components of a specialized honey house used only to process the beekeeper's own honey exempt?

Plain-English summary

Components of the honey house qualified for exemption because the structure was on the farm, exclusively used by the beekeeper, used only to extract and bottle honey the beekeeper produced, and specially built for that purpose. The stated features included slab drains, specialized honey plumbing, sanitary metal walls, built-in extraction and filtering equipment, and ceiling-mounted electrical outlets.

The beekeeper could issue the supplier an exemption certificate instead of tax. An earlier attached letter warned that ordinary buildings and structural components were generally not exempt; a structure could qualify when it was essentially agricultural equipment or machinery, specifically designed for agricultural production, and not economically usable for another purpose. Storage, office use, or processing honey produced by someone else would have defeated the described exemption.

The source also carries a later alert that H.B. 268 changed registration requirements for certain agricultural and timber exemptions effective January 1, 2012.

Common questions

Why did the honey house qualify? Its stated exclusive on-farm use, specialized construction, and restriction to the beekeeper's own honey supported treating it as necessary agricultural equipment or machinery rather than an ordinary building.

What uses would have defeated the exemption under the earlier letter? Storage, office use, or extracting honey the beekeeper did not produce.

How could the exemption be claimed? By giving the supplier an exemption certificate, subject to the later registration alert and current law.

Citations and references

• Texas H.B. 268, 82nd Regular Legislative Session (2011) — identified in the source alert as requiring a Comptroller-issued registration number for certain agricultural and timber exemptions effective January 1, 2012.
• The letters refer to an enclosed agricultural rule but do not identify or reproduce its number.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8508L0654A01

Original ruling text

ALERT: This document may be affected by changes to the Tax Code which was amended by H.B. 268, 82nd Reg. Legislative Session, 2011. The amendment required persons claiming a sales tax exemption for certain agricultural and timber products to apply for and provide a registration number issued by the Comptroller, effective 01/01/2012.

August 2, 1985

Dear ***:

Thank you for providing the additional information regarding construction
of your honey house.

In part, you state that the honey house will:
o be located on the farm.
o be for your exclusive use.
o not be utilized for storage space or office facilities.
o be used only for extracting and bottling honey you produce.
o be specifically built for this purpose only and will include:

• drains built into the slab.
• specialized plumbing to move honey.
• special sanitary metal walls.
• extraction and filter equipment built in to the realty.
• specialized ceiling mounted electrical outlets.

Based on this information, the components of the honey house qualify for
exemption from the sales tax. You may issue your supplier an exemption
certificate in lieu of tax. I am enclosing appropriate rules for your use.

This opinion is based upon the facts you presented. If there are additional
or different facts, this opinion may change.

Please feel free to contact us if you have additional questions. You may write
us, call toll free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Tax Policy Section
Tax Administration Division

July 24, 1985

Dear ***:

Thank you for your recent letter to ***. I have been asked to respond.
The following rule excerpts should be helpful.

Buildings and structural components and/or the materials used to build, construct,
or fabricate the following facilities are not exempt from the limited sales and use tax.

(A) Buildings include any structure or edifice enclosing a space within its walls,
and usually covered by a roof, the purpose of which may be to provide shelter or
housing, or to provide working, office, or sales space. For example, houses, offices,
barns, warehouses, garages, and stores.

(B) Structural components include those parts of a building or machinery in, on, or
adjacent to a building, relating to the operation or maintenance of the building. For
example, air conditioning or heating systems. However, if the sole justification for
installation is to meet humidity or temperature requirements essential for the operation
of other machinery or the processing of plants, animals, or foodstuffs, the structural
component is exempt.

However, the following may not be taxable.

Buildings and structures which are essentially an item of equipment or machinery
necessary for agricultural production if the structure is specifically designed for
such use, and the structure cannot be economically used for any other purpose. For
example, automated laying houses, farrowing houses, and commercial greenhouses.

It is not clear from your letter if this building will be on your farm and not used
for any purpose other than processing, packing or marketing honey that you yourself produce.

If the building were used to provide storage or office space or if you extract honey
which you do not produce, the exemption would be disallowed.

I am enclosing a copy of the agricultural rule for your review and welcome any additional
information you can provide.

Please feel free to contact us if you have additional questions. You may write us, call
toll free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Tax Policy Section
Tax Administration Division