Could a seller use a stamped impression on its invoice as an agricultural exemption certificate, and what information had to appear?

Plain-English summary

The seller proposed using a stamped impression on its sales invoices as an exemption certificate. The Comptroller rejected the submitted wording but said a stamp could be acceptable if it supplied all required information not already on the invoice.

Under Rule 3.287, the certificate needed the purchaser's name and address, an item description, a specific reason the purchase was exempt, and the purchaser's signature and date. The exemption reason could not be preprinted or merely say “for farm or ranch use”; the purchaser had to explain the actual qualifying use.

The certificate signature had to be separate and distinguishable from the ordinary invoice signature. The retailer also had to take the certificate at or before the sale, validate the exemption reason and item, and accept it in good faith.

STAR adds a later alert: H.B. 268 changed the Tax Code and required a Comptroller registration number for certain agricultural and timber exemptions beginning January 1, 2012.

What this means for you

A convenient invoice stamp was possible, but it could not replace transaction-specific information supplied by the purchaser. The later STAR alert confirms that the 1987 form requirements are incomplete for current agricultural and timber claims.

Common questions

Was the proposed stamp approved? No.

Could any stamped invoice work? Yes, if the stamp and invoice together contained all required certificate information.

Was “for farm or ranch use” specific enough? No.

Who had to state the exemption reason? The purchaser.

When did the retailer need the certificate? At or before the time of sale.

What later change does STAR identify? A registration-number requirement for certain agricultural and timber products effective January 1, 2012.

Citations and references

• Comptroller Rule 3.287 — exemption-certificate content and form.
• Comptroller Rule 3.296 — example distinguishing exempt tractor lubricant from taxable lubricant used in a highway-licensed farm truck.
• H.B. 268, 82nd Regular Session (2011) — STAR alert concerning agricultural and timber registration numbers effective January 1, 2012.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8706L0819C09

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.

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller June 19, 1987

Dear **:

Thank you for your recent letter requesting approval of the wording on
a stamped impression you propose to use on your sales invoice to meet
the requirements of an exemption certificate.

As explained over the phone, I regret to inform you the wording you
submitted is not acceptable as a valid exemption certificate. The
information below is provided to assist you in determining the most
convenient and efficient manner to meet your exemption certificate needs.

The use of a stamped impression on a sales may be acceptable if
it includes the following required information as set out in Rule 3.287:

1. The name and address of the purchaser.
2. A description of the item to be purchased.
3. The reason the purchase is exempt from tax.
   a. The reason should not be a preprinted item.
   b. The reason must be explicit and descriptive. A general
   statement like "for farm or ranch use" is not acceptable.
   c. The purchaser should complete this blank. This is
   necessary because a farmer is not an exempt entity, and
   the items being purchased are not exempt by nature. The
   specific use of the items will determine if the items
   are taxable. For example, oil and grease used to lubricate
   a tractor used exclusively on a farm or ranch in the produc-
   tion of a food product sold in the regular course of business
   qualifies for exemption under Rule 3.296. However, the same
   items used on a farm truck that is licensed for highway use
   is not exempt.
4. The signature of the purchaser and the date.

The exemption certificate must be in substantially the form as shown on
page 4 of the rule.

With the above in mind, if you choose to use a stamped impression on
your sales invoices to satisfy the requirements of an exemption
certificate, the impression should include any information not already
provided on the sales invoice. Also, the signature applicable to the
exemption certificate must be separate and distinguishable from any
signature required for invoice purposes.

I would also like to point out that exemption certificates can only be
accepted "in good faith" by a retailer if taken at or before the time of
sale, the reason for exemption is valid, and the item being sold comes
within the stated reason for exemption. If not taken in good faith,
certificates will be disallowed in an audit.

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

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,
Sandi Skaggs
Tax Policy Section
Tax Administration Division