Which animal-feed purchases qualified for Texas's agricultural sales-tax exemption for a horse-and-llama ranch?

Plain-English summary

The requester raised and bred quarter horses, miniature horses, and llamas. Rule 3.296 defined a farm or ranch as land used to produce crops, livestock, or other agricultural products held for sale in the regular course of business. Based on the facts provided, the Comptroller said the ranch did not then qualify for all exemptions in the rule.

The letter nevertheless listed exempt feed categories: horses and mules; animals ordinarily constituting food for people; work animals used exclusively to produce agricultural products or assist disabled people; animals held for breeding whose offspring were held for sale; animals held for sale in the regular course of business; and wildlife.

Animals held for sport or show or as pets did not qualify under that list, and pet food was taxable.

STAR places a later alert above the letter. It says House Bill 268 changed the Tax Code and, effective January 1, 2012, required people claiming exemptions for certain agricultural and timber products to obtain and provide a Comptroller registration number.

What this means for you

The purpose for which an animal is held mattered. A breeder should document whether animals or their offspring are held for sale in the regular course of business and should check the later agricultural-registration requirements flagged by STAR.

Common questions

Was horse feed exempt? The letter listed horses and mules as exempt feed categories. Was feed for breeding animals exempt? Yes when their offspring were held for sale. Was pet or show-animal feed exempt? No. Did the Comptroller say the ranch qualified for every agricultural exemption? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.296
• House Bill 268, 82nd Legislature, Regular Session (2011), as described in STAR's later 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/9201L1151F12

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.

January 8, 1992

Dear ***:

Please accept my apology for the delay in responding to your letter
concerning your horse and llama ranch.

You indicated that you are currently raising and breeding quarter
horses, miniature horses and llamas. Rule 3.296 on agricultural
exemptions defines a farm or ranch as land used in the production of
crops, livestock, and/or other agricultural products held for sale in
the regular course of business. Refer to section (f) of the rule.
According to the facts that you presented, it does not appear that
your ranch can qualify for all of the exemptions outlined in the rule
at this time.

Feed for the following types of animals is exempt:

1. horses and mules

2. animals which ordinarily constitute food for humans (e.g. cows,
   pigs, etc.)

3. work animals used exclusively to produce agricultural products
   (e.g. sheep dogs) or to aid handicapped persons (e.g. seeing eye dogs)

4. animals held for breeding purposes whose offspring are held for sale

5. animals held for sale in the regular course of business

6. wildlife

There is no exemption for animals held for sport or show or as pets.
Pet food is taxable. See section (2) of Rule 3.296.

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

Please feel free to contact me if you have any additional questions
about my response. You may write me, call toll free 1-800-252-5555, ext.
4685, from anywhere in the United States or phone (512) 463-4685.

Sincerely,

Julie Pesl
Tax Administration Division