Were two-way radios and shared repeater services exempt as farm and ranch equipment, and could the Comptroller assess a dealer that relied on earlier agency information?

Plain-English summary

The Comptroller concluded that two-way radios used on farms and ranches were taxable. Although they could be convenient and useful, they were not used directly and exclusively in the physical production of agricultural products.

The Comptroller nevertheless removed all radio-sale and shared-repeater-service liabilities from this dealer's existing audit. The office had given the dealer information in 1982 and, when the issue was settled in 1985, had not effectively informed farm and ranch supply dealers of the new position.

The relief was backward-looking only. From the date of the letter forward, the dealer had to collect sales tax on this equipment and would be responsible in future audits.

What this means for you

The letter separates the tax rule from the remedy for this dealer's agency reliance. The equipment was taxable, but the Comptroller declined to impose the audited liability created while the dealer reasonably followed earlier agency information.

Common questions

Were farm and ranch radios exempt? No. They were not used directly and exclusively in agricultural production.

Why were the audit liabilities deleted? The dealer had relied on information supplied in 1982, and the Comptroller had not effectively communicated the 1985 resolution of the issue.

Did the dealer receive a continuing exemption? No. The letter required collection of sales tax going forward.

What liabilities did the relief cover? The letter says radio sales and shared repeater services in the audit.

Citations and references

• No statute or rule number is cited in the ruling text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8707L0846A07

Original ruling text

Bob Bullock
Comptroller of Public Accounts
Austin, Texas

July 29, 1987

Dear ***:

I appreciate the time you have given me to thoroughly review your audit
and the question of the sales tax exemption in regard to two-way radios.

My review shows that there has been some confusion over this issue in
the past in our office. But the question was finally settled once and
for all in 1985: radios are taxable because while they might be conven-
ient and useful on farms and ranches they are not used directly and ex-
clusively in the physical production of agricultural products as
required by law.

But my review shows also that when the issue was settled in 1985 there
was no effective effort made by our office to inform farm and ranch
supply dealers of the decision. Therefore, I think we have to honor
your reliance on the information you were given in 1982 and delete from
the audit all liabilities having to do with radio sales and shared
repeater services.

Please understand that from today forward you must charge the sales tax
on this kind of equipment as you will be held responsible for it in
future audits.

Let me also make a couple of comments on the questions you raised about
the way the audit was conducted. First, let me apologize for the
auditor's failure to give you written material supporting his contention
that radios are taxable. That was inexcusable. Tax Policy letters and
a ruling were readily available to him and he should have given them to
you without hesitation.

Second, let me apologize that he interrupted the audit after starting it
and came back later. Mr. Dan Pearson, director of Audit, has given me a
reasonable explanation of why this had to be done--but I still do not
like audits in progress to be interrupted.

I hope my decision and my response is satisfactory to you. While the
old saying about "ignorance of the law" is fine in most cases, this
office does have a responsibility to tell Texans exactly what is
expected of them and I think we failed to do so in this situation.

Sincerely
BOB BULLOCK
Comptroller of Public Accounts