Is a weather-recording device used to time crop spraying taxable in Texas, or can a farmer buy it under the agricultural exemption?

Plain-English summary

A manufacturer of a weather-recording device — one that records weather conditions to help determine the best time to spray crops (initially designed for pecan growers, with plans to adapt it for onions, grapes, and other crops) — asked the Comptroller about the device's taxability. The Comptroller confirmed:

• The device is an item of tangible personal property and is taxable.
• However, it can qualify for the agricultural exemption. By recording weather conditions to time spraying, it helps increase crop production by reducing loss to fungus, insects, and the like.
• It qualifies for the agricultural exemption when it is used on farms or ranches exclusively in the production of an agricultural product held for sale in the regular course of business.
• To claim the exemption, the farmer or rancher must issue an exemption certificate to the seller in lieu of the tax. The certificate must show the purchaser's name, title, address, telephone number, signature, and date; the seller's name and address; a description of the item; and the reason for the exemption.

The Comptroller enclosed Rules 3.287 and 3.296 for the taxpayer's records.

Currency caveat (from the STAR record): the published document carries an ALERT that the Tax Code was amended by H.B. 268 (82nd Legislature, 2011), which — effective January 1, 2012 — requires persons claiming the agricultural/timber exemption to apply for and provide a registration number issued by the Comptroller. So today an exemption certificate alone is not enough; the buyer needs a valid Ag/Timber registration number.

What this means for you

Sellers of farm and ranch equipment

Equipment like this is taxable by default, but you can sell it tax-free to a qualifying farmer or rancher who gives you a properly completed agricultural exemption certificate. Make sure the certificate contains all the required elements before you honor it.

Farmers and ranchers

You can buy qualifying equipment exempt only if it is used exclusively in producing an agricultural product held for sale. And note the modern requirement: since January 1, 2012, you must have a Comptroller-issued Ag/Timber registration number and put it on your exemption certificate.

Common questions

Q: Is a crop-spraying weather device taxable in Texas?
A: Yes, it is taxable tangible personal property — but it can qualify for the agricultural exemption when used on a farm or ranch exclusively to produce an agricultural product held for sale.

Q: How does the farmer buy it tax-free?
A: By issuing the seller a properly completed agricultural exemption certificate (with the purchaser's and seller's details, a description of the item, and the reason for the exemption) in lieu of paying tax.

Q: Has anything changed since 1988?
A: Yes. Effective January 1, 2012 (H.B. 268, 2011), claiming the agricultural exemption also requires a Comptroller-issued registration number, per the alert on the STAR record.

Q: Can I rely on this 1988 letter today?
A: Treat it as guidance only, and account for the 2012 registration-number requirement. It is based on the facts presented, binds the Comptroller only as to the taxpayer it was issued to, and may no longer reflect current policy.

Citations and references

• 34 Tex. Admin. Code Rules 3.287 and 3.296 — agricultural exemption rules the Comptroller enclosed with the letter.
• H.B. 268, 82nd Legislature (2011) — noted in the STAR alert; effective January 1, 2012, it requires a Comptroller-issued registration number to claim the agricultural/timber exemption.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8807L0910D06

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.

July 25, 1988

Dear ***:

I am providing a written record of our meeting and telephone conversation
regarding the taxability of your product the PRODUCT A.

As we discussed, the PRODUCT A is an item of tangible personal property
and is taxable. However, it can qualify for the agricultural exemption. It
is designed to record certain weather conditions in order to determine the
most appropriate spraying time. This in turn causes more crop production by
reducing loss to fungus, insects, etc. PRODUCT A is currently designed
for pecan growers but will be developed for use on onion farms, grape
vineyards, etc.

In order to claim the exemption the pecan grower (farmer or rancher) must
issue an exemption certificate to your company in lieu of the tax. The
exemption certificate should give the purchaser's name, title, address,
telephone number, signature and date; seller's name and address; description
of the item purchased; and the reason the exemption is being claimed. PRODUCT A
qualifies for the agricultural exemption when it is used or employed on farms
or ranches exclusively in the production of an agricultural product held for
sale in the regular course of business. I am enclosing Rules 3.287 and 3.296
for your records.

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

You may write Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Tax Policy Division
Tax Correspondence