Was a portable building for raising emu chicks exempt from Texas sales tax as agricultural equipment?

Plain-English summary

Partners raising emus for meat, oil, leather, and feathers asked whether a portable building for new chicks would be taxable. The Comptroller did not expressly decide whether that particular building qualified for exemption. Instead, the letter stated the governing test.

To qualify, a building had to be used exclusively either to produce food for human consumption or to process, pack, or market agricultural products. It could not serve any other purpose. It also had to be specifically designed and mechanically built so that it functioned as equipment rather than as ordinary storage or shop space. The letter cited Rule 3.296(g)(8)(C).

The letter separately concluded that sales of emus would be exempt when the animals were processed as food for human consumption. Although the office said it did not necessarily agree that emus ordinarily constituted human food, it extended the same treatment given to other food animals under those circumstances.

STAR places an alert on the document stating that a 2011 Tax Code amendment required people claiming exemptions for certain agricultural and timber products to obtain and provide a Comptroller-issued registration number beginning January 1, 2012.

What this means for you

Farmers and ranchers

Agricultural use alone did not automatically exempt a building under this letter. Exclusive qualifying use and an equipment-like specialized design were both important; an ordinary structure usable for storage or shop work would not satisfy the stated test.

Sellers of agricultural buildings

This letter does not establish that every portable chick building is exempt. The actual design, mechanical features, and permitted uses would need to satisfy the Rule 3.296 standard described in the source.

Common questions

Did the Comptroller approve an exemption for the proposed portable building? Not expressly. The letter stated the test but did not apply it to enough design facts to announce a final building-specific conclusion.

What use restriction did the letter describe? The building had to be used exclusively for producing food for human consumption or for processing, packing, or marketing agricultural products, with no other use.

Were sales of emus exempt? Yes, under the circumstances stated in the letter, when the emus were processed as food for human consumption.

Is the 1992 procedure necessarily current? No. STAR warns that a 2011 amendment added a registration-number requirement for certain agricultural and timber exemptions effective January 1, 2012.

Citations and references

• 34 Tex. Admin. Code Rule 3.296(g)(8)(C) (agricultural buildings and equipment)
• H.B. 268, 82nd Reg. Leg., R.S. (2011) (later registration requirement described in STAR's 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/9203L1158F12

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.

March 4, 1992

Dear **:

Thank you for your recent letter asking about the agricultural
exemption as it may or may not apply to raising emus.

You stated in your letter that you and your partner have gone into
the business of raising emus for meat, oil, leather and feathers.

You specifically asked if a portable building being built to use
as a broader house for new chicks is taxable.

The taxability of buildings rests upon a determination of whether
or not they are exclusively used in the production of food for
human consumption or exclusively used in processing, packing or
marketing agricultural products. The building cannot be used for
any other purpose. It must be so specifically designed and built
in such a mechanical way that it in essence becomes a piece of
equipment rather than simply a building which might be used for
storage or shop space. See Section (g)(8)(C) of Rule 3.296.

Rule 3.296 also exempts from tax the sale of any form of animal
life of any kind, the products of which ordinarily constitute food
for human consumption.

Although this office does not necessarily agree that emus
ordinarily constitute food for human consumption, we will extend
the same treatment to them as we have to other animals when
processed as food for human consumption. The sale of emus is
exempt from tax under these circumstances.

This opinion is based on the facts presented. Different facts,
though similar, might lead to different answers. If you have any
questions, feel free to write or call me at 1-800-531-5441,
extension 5-0330, or 512/463-4600.

Sincerely,

Bettie Peterson
Tax Administration Division