Could a commercial nursery buy boards and nails tax-free to build plant tables needed for air circulation and disease prevention?

Plain-English summary

The nursery needed tables that allowed air to circulate above and below its plants to prevent root rot, pest diseases, and infestation. It sold the plants in the regular course of business.

The Comptroller treated the tables as machinery or equipment used exclusively by a commercial nursery to produce agricultural products for sale. Boards, nails, and other table materials could be purchased tax-free with an exemption certificate.

STAR warns that H.B. 268 later required a Comptroller-issued registration number for certain agricultural and timber exemptions effective January 1, 2012, so the 1990 certificate procedure should not be assumed current.

Common questions

Were boards and nails taxable? No under the 1990 ruling.

Why did the tables qualify? They were used exclusively in producing plants for sale.

Is the 1990 procedure necessarily current? No. STAR flags the later registration change.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9003L0993C07

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, TX 78774

BOB BULLOCK
Comptroller

Dear *:

We received your letter, concerning the taxability of materials
which you will use to build tables for your plants. According to
your letter and our telephone conversation, your plants must have
proper air circulation to prevent root rot, pest diseases, and
infestation. The air must circulate above and below the plants
for healthy plants. You are in the business of selling these
plants.

Sales tax is not due on machinery or equipment used by commercial
nurseries exclusively in the production of agricultural products
to be sold in the regular course of business. See subsections
(a) (5) and (f) of the enclosed Rule 3.296 relating to agriculture.

The materials used to build the tables, such as the boards and
nails, may be purchased tax free. You should issue an exemption
certificate to your vendor when you purchase the materials to
construct the tables. Enclosed is a copy of Rule 3.287 relating
to exemption certificates.

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

If you have any questions you may call or write 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