Could preprinted farm-use language on a sales invoice replace a Texas exemption certificate, and what information did an invoice-based certificate need?

Plain-English summary

A seller proposed printing a statement on its invoice saying the merchandise would be used exclusively on a farm or ranch to produce food or other agricultural products for sale.

The Comptroller said that statement was not an acceptable substitute for an exemption certificate. An invoice could function as the certificate only if it supplied all information Rule 3.287 required: the purchaser's name and address, the item purchased, an explicit and descriptive exemption reason completed by the purchaser, the purchaser's signature and date, and the seller's name and address.

The exemption reason could not be a preprinted generality such as "for farm or ranch use." The specific use controlled. The letter contrasted exempt oil and grease used in a tractor devoted to qualifying agricultural production with taxable use of the same products in a highway-licensed farm truck.

Any certificate signature also had to be separate and distinguishable from a signature used merely to approve the invoice.

STAR now carries an alert that a 2011 amendment affected this area by requiring a Comptroller-issued registration number for certain agricultural and timber exemptions beginning January 1, 2012. This page describes the 1989 letter and does not treat its procedure as current law.

Common questions

Was the seller's proposed preprinted statement enough? No.

Could an invoice ever serve as the certificate? Yes, if it contained every required detail and a separate certificate signature.

Could the exemption reason simply say "farm or ranch use"? No. It had to describe the qualifying use explicitly.

Citations and references

• 34 Tex. Admin. Code Rule 3.287
• 34 Tex. Admin. Code Rule 3.296

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8910L0964C12

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 October 13, 1989

Dear **:

Thank you for your letter questioning whether the following
statement, when printed on a sales invoice, would suffice in
lieu of an exemption certificate:

"The undersigned certifies the merchandise herein purchased
will be used exclusively on a farm or ranch in the production
of food for human consumption or other agricultural products
to be sold in the regular course of business and is exempt
from payment of taxes under Chapter 151, Rule 3.287. If any
other use is made, the undersigned will be responsible for
the payment of any taxes due."

Unfortunately, this statement is not acceptable in lieu of an
exemption certificate. A statement on a sales invoice may be
accepted if it includes the following required information as set
out in Rule 3.287 which is enclosed:

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 pre-printed 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 pro-
   duction 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 date.
5. The name and address of the seller.

If you choose to use a statement on your sales invoice to satisfy
the requirements of an exemption certificate, the statement must
include any required information that is 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.

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 contact
Tax Correspondence. You may call toll free 1-800-252-5555, or our
regular number is 512/463-4600. My extension is 3-4658.

Sincerely,
Sherry Buckley
Tax Correspondence