Ezel / Tax Rulings / TX
TX 8610L0767C13 Sales and/or Use Tax (State,Local,MTA) 1986-10-24

When did cotton module builders and tarps qualify for Texas's agricultural exemption, and did a cotton gin qualify as the original producer?

Short answer: They could qualify only when used exclusively to process, pack, or market the original producer's own products. A cotton gin was not the original producer and had to pay tax.

Apply this to your situation

This page answers the general question as of 1986. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1986
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This 1986 Texas Comptroller letter decides cotton module builders and tarps, not every equipment type in STAR's broader caption. STAR warns that H.B. 268 later added registration-number requirements for certain agricultural and timber exemptions effective January 1, 2012. Cotton, gin, producer, processing, packing, marketing, registration, certificate, and local-tax rules may have changed. STAR documents may no longer represent current policy even when not marked superseded. Identities are redacted. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The Texas Comptroller said cotton module builders and tarps were not used exclusively in agricultural production.

They could qualify for exemption when used exclusively to process, pack, or market the original producer's own agricultural products. A cotton gin was not the original producer and had to pay tax on its module builders and tarps.

STAR now adds an alert that H.B. 268 required a Comptroller registration number for certain agricultural and timber exemptions beginning January 1, 2012.

What this means for you

The equipment's function and the user's identity both mattered. Processing use could qualify only for the original producer's own products, not for a separate cotton gin.

Common questions

Were module builders and tarps exempt as production equipment? No.

Could processing or packing use qualify? Yes, for the original producer's own products and exclusive use.

Was a cotton gin the original producer? No.

Citations and references

  • H.B. 268, 82nd Texas Legislature, Regular Session (2011) — identified in STAR's alert as adding the registration-number requirement.

Source

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.

October 24, 1986

Dear ***:

Thank you for your letter of October 1, 1986, concerning tax on cotton
module builders and module tarps.

Cotton module builders and module tarps are not used exclusively in the
production of agricultural products.

Cotton module builders and tarps may qualify for the exemption when used
exclusively in the processing, packing, or marketing of the original
producer's own agricultural products.

A cotton gin is not the original producer and must pay tax on tarps and
cotton module builders purchased for their use.

This opinion is based upon the facts 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 or
telephone 512/463-4600.

Sincerely,

Tax Policy
Tax Administration Division

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