Could farmers and ranchers buy parts and repairs tax-free for farm machinery, including highway-licensed vehicles or farm-tagged pickups?

Plain-English summary

Farmers and ranchers could issue an exemption certificate for parts and repairs to machinery or equipment used exclusively on a farm or ranch to produce agricultural products for sale.

The exemption did not apply to motor vehicles licensed for highway use, including pickup trucks with farm tags. Retailers were not to accept exemption certificates for items that could not qualify.

Under the historical procedure described, the farmer filed a completed certificate on the initial purchase of an item from that retailer, and later invoices for that item were stamped "Exempt for Agricultural Purposes" and signed. STAR now warns that H.B. 268 changed the law to require a Comptroller registration number for certain agricultural and timber exemptions effective January 1, 2012.

Common questions

Could parts for exclusively used farm machinery be exempt? Yes.

Did a farm tag make a pickup exempt? No.

Does the 1990 certificate procedure remain current? STAR flags a registration-number change effective in 2012.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9001L0976G11

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, TEXAS 78774

January 4, 1990

Dear ****:

Thank you for your recent letter regarding blanket exemption
certificates.

You stated that your business is resale auto parts and auto mechanic
repair. Farmers and ranchers can issue an exemption certificate for parts and
repair to machinery and equipment that is exclusively used on a farm or ranch
in the production of agricultural products for sale. However, the exemption
does not apply to motor vehicles licensed for highway use, including pick- up
trucks with farm tags.

In the past, farmers filed a properly completed exemption certificate
with the retailer each time they bought a tax-exempt item. Now they file a
properly completed certificate with a retailer only for the initial purchase of
that item from that retailer.

Retailers will keep that initial certificate on file and, when subsequent
purchases of the item are made, will stamp the invoice, "Exempt for
Agricultural Purposes." A farmer or rancher will sign the stamped invoice,
thereby signifying that the purchase is exempt from sales tax.

Retailers are not to accept certificates for items which cannot be
exempted under the statute, for example, parts that go on motor vehicles
licensed for highway use.

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

If you have any questions or need additional information, you may call me
toll-free at 1-800-252-5555 extension 5-0330 or write to me at Tax
Correspondence, Comptroller of Public Accounts.

Sincerely,
Bettie U. Peterson
Tax Correspondence