Did a specially designed 60-by-100-foot building for processing, packing, and marketing an owner's vegetables qualify as exempt agricultural equipment?

Plain-English summary

The agricultural producer proposed a 60-by-100-foot building for processing, packing, and marketing the producer's vegetables. It would have a sloped floor, drainage trough, and piping for processing water, and the requester said it could not economically serve another purpose.

The Comptroller nevertheless denied the agricultural-equipment exemption. The letter said a qualifying building had to be used exclusively for producing food for human consumption or exclusively for processing, packing, or marketing agricultural products; there was no predominant-use test.

It also had to be designed and built so mechanically and specifically that it effectively became equipment rather than a building usable for storage or shop space. Rule 3.296(f)(8)(C) gave automated laying houses, farrowing houses, and commercial greenhouses as examples.

What this means for you

Qualifying use alone did not establish the historical exemption. The structure also had to cross the letter's demanding design line from an ordinary building to an item functioning as agricultural equipment.

Common questions

Did the proposed vegetable building qualify? No.

Was predominant agricultural use enough? No. The letter said there was no predominant-use test and required exclusive qualifying use.

What design standard applied? The building had to be so mechanically specialized that it functioned as equipment rather than ordinary storage or shop space.

What examples did the rule give? Automated laying houses, farrowing houses, and commercial greenhouses.

Citations and references

• 34 Tex. Admin. Code Rule 3.296(f)(8)(C) — historical agricultural-equipment provision cited for the building examples and exemption analysis.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8712L0856B01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller December 15, 1987

Dear ***:

Thank you for your recent letter to Mrs. Hutcheson. Because she is no
longer in Tax Policy Division, I have been asked to respond.

FACTS:

I need a written opinion from you as to whether I am exempt from
paying a sales tax on a farm building. I live out in the country-
about 10 miles from the nearest town, Raymondville, Texas.

This building will be built for agricultural production only. I
will have a 2 inch slope on the floor designed for all the water
from processing and packing of fresh vegetables. It will drain
into a 3 inch trough built on one end of the building and it will
also have adequate piping to drain used water to a near-by ditch.
The building will be 60' X 100' and cannot be economically used
for any other purpose. The machinery and equipment will be used
by me, the original producer in the processing, packing and,
marketing of all my agricultural products.

DISCUSSION:

The taxability of buildings rests upon a determination of whether or not
they
are exclusively used in the production of food for human consumption or
exclusively used in processing, packing or marketing agricultural
products.
The law has no "predominant" use test. The building cannot be used for
any
other purpose.

It must be so specifically designed and built in such a mechanical way
that
it in essence becomes a piece of equipment rather than simply a building
which might be used for storage or shop space.

The examples given in Rule 3.296(f)(8)(c) are automated laying houses,
farrowing houses and commercial greenhouses.

CONCLUSION:

The building described in your fact situation does not qualify for
exemption
as an item of agricultural equipment. I am enclosing Rule 3.296 for your
reference.

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 Policy Division.

Sincerely,
AL Van Allen
Tax Policy Division