Did Texas's agricultural exemption cover a forklift used exclusively in the field to load and unload a farmer's row crops and lawn turf?

Plain-English summary

The farmer grew both row crops and lawn turf from seed, making the farmer the crops' original producer. The Comptroller said a forklift used exclusively to load and unload those crops in the field where the grass was grown qualified for the agricultural equipment exemption under Rule 3.296(5)(b).

The request asks about renting a forklift, but the response's final sentence says the “purchase of forklifts” would qualify. The underlying conclusion is clear about the described exclusive agricultural use, but the document does not separately explain rental mechanics.

STAR adds a later alert: H.B. 268 changed the Tax Code and, effective January 1, 2012, required a Comptroller-issued registration number for certain agricultural and timber exemption claims.

What this means for you

The historical exemption depended on the taxpayer being the original producer and using the equipment exclusively for processing, packing, or marketing the producer's agricultural products. Current registration and documentation rules must be checked.

Common questions

Did growing lawn turf count as producing a farm crop? Yes under the stated facts because the farmer grew it from seed.

Did the forklift qualify? Yes for the described exclusive field loading and unloading use.

Can this 1988 procedure be followed today? Not without checking current law; STAR flags a registration-number change effective in 2012.

Citations and references

• 34 Tex. Admin. Code Rule 3.296(5)(a)-(b) — agricultural machinery and equipment provisions cited by the letter.
• H.B. 268, 82nd Regular Legislative Session (2011) — later registration-number change identified in STAR's alert.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8802L0854D13

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 February 4, 1988

Dear ***:

On behalf of Mr. Bullock, I hope you'll accept my apology for the delay
in
answering your question involving changes in the sales tax law. This
isn't
the way we normally do business.

Our people were, and still are, swamped by a deluge of inquiries as they
attempted to interpret provisions of the new law and draft rules which
would
not adversely impact businesses. In many instances, an answer to a
question
just wasn't available when the question arrived.

Regarding your letter of December 22, 1987, regarding the agricultural
exemption, your question is briefly restated below with an appropriate
response.

Your client is a farmer of both row crops and grass (lawn turf). He
rents a forklift which is used to load the grass harvested onto the
trucks from his production in the fields. Is this rental of equipment,
as set forth in Rule 3.296 (5)(a), subject to sales tax?

Response: Since your client, as stated above is actually growing a farm
crop
from seed, he is considered the original producer of such crops. Please
note that sales tax is not due on machinery, and equipment exclusively
used
in the processing, packing or marketing of agricultural products by the
original producer, as explained in the enclosed Rule 3.296 (5)(b).

The purchase of forklifts by your client exclusively for loading and
unloading row crops and grass turf in the field where the grass is grown
would qualify for exemption from the tax.

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 our
toll-free
number 1-800-531-5441. The regular number is 512/463-4600, You may write
me
at the Tax Policy Division.

Sincerely,
Julie Pesl
Tax Policy Division