Did this 1990 Texas internal memo conclusively exempt feedlot grain-mixing equipment?

Plain-English summary

This document is an internal Comptroller memo containing competing notes rather than a final taxpayer-facing ruling.

Its opening passage says grain-mixing equipment was exempt when used exclusively by feedlots to make cattle feed for animals sold for human consumption. It also says the equipment became taxable if the feed was sold.

Later notes record an unresolved conflict. One cited case and an auditor memo treated purchased ingredients as processing and denied the agricultural exemption because the feedlot was not the original producer. Another official believed feedlots should be treated like farms or ranches and the equipment exempt.

The memo does not state which view ultimately controlled. It also poses, without answering, a separate question about off-pavement motor bikes used for ranch work.

STAR adds a later-law alert that 2011 legislation required a registration number for certain agricultural and timber exemptions beginning January 1, 2012.

What this means for you

This source should not be cited as a definitive feedlot exemption. It is useful evidence of the issue and competing agency views, but a current taxpayer needs later controlling guidance.

Common questions

Did the memo clearly exempt grain-mixing equipment? No. Its passages conflict.

What supported exemption? Exclusive agricultural use to produce feed for cattle sold for human consumption.

What supported taxation? The view that mixing purchased ingredients was processing by someone other than the original producer.

Did the memo answer the motor-bike question? No.

Citations and references

• Tex. Tax Code § 151.316(7) (agricultural equipment, as cited)
• Comptroller Hearing No. 5471 (242A11)
• H.B. 268, 82nd Regular Legislative Session (2011 registration-number requirement; STAR 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/9010L1058A01

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.

October 30, 1990

To: Ledford Kelly

From: Adina Whittemore via Lucy Glover

Subject: Grain Mixing Equipment Purchased by Feedlots

Feedlots purchase equipment to mix grains for cattle feed.

The agricultural exemption extends to machinery and equipment used

exclusively in the production of food for human consumption. Since

the feedlots are mixing grains for cattle, which are sold for human

consumption, the grain mixing equipment is exempt.

However, the exemption is only available if the equipment is used

exclusively in an agricultural operation, the equipment will be

taxable if the feed is also sold.

[see 151.316(7) and hearing number 5471 (242A11)]

FEEDLOTS

Feedlots keeps cattle for various owners. Mixes its own feed from a

variety of different ingredients bought from 3rd parties to feed the

cattle. Paid by the cattle owners on a price per pound gained basis.

Is the feed processed (manufactured) or produced?

*'s case says the feed lot is not the "original producer" because

the ingredients are bought from others. Therefore, the feed is proces-

sed, and the machinery and equipment is not exempt under agricultural

exemption.

Eddie Washington wrote a memo to an auditor saying this. Harold Lee

thinks the equipment is exempt because we consider feedlots to be the

same as a farm or ranch.

OFF PAVEMENT BIKES FOR FARM USE

Ranch owner uses two motor bikes to maintain roads, water facilities

and production of food for human consumption. "Cheaper than pickups,

more effective than horses"

Bikes are five horsepower, weigh 140 pounds and are not dirt or street

bikes. "Just small bikes for off pavement use and are your basic trans-

portation"

Do they qualify for agricultural exemption?