When did Texas start applying the agricultural exemption to ostriches, emus, rheas, and cassowaries, and does it matter whether these birds are commonly thought of as food?

Plain-English summary

A taxpayer asked the Comptroller's office on what date the agricultural exemption began being applied to ostriches, emu, rhea, and cassowaries in Texas. The office responded that it began applying the exemption to ostriches in March 1990, after the Texas Department of Agriculture published information that ostriches were being raised as food for human consumption — though the letter notes ostriches could potentially have qualified for the exemption even before that date under Rule 3.296(a)(1).

The letter also addresses the broader group of birds known as ratites — which it describes as including ostriches, emus, rheas, cassowaries, and possibly others. The office states that although it does not necessarily agree these birds are ordinarily considered food for human consumption, it extends the same agricultural exemption treatment to them that it applies to other animals when they are processed as food for human consumption.

Note: this is a very short, narrowly framed letter — it answers a timing question (when did the exemption start applying) rather than laying out the full mechanics of the agricultural exemption itself.

What this means for you

Ostrich, emu, rhea, and cassowary (ratite) farmers

If you raise ratites that are processed as food for human consumption, the Comptroller's office treats them the same as other animals raised for that purpose for purposes of the agricultural exemption — even though the office is on record saying it doesn't necessarily view these birds as ordinarily constituting food. The key fact triggering exempt treatment is that the birds are processed as food for human consumption, not that ratites are a "typical" food animal.

Businesses claiming exemption for pre-1990 activity

The letter notes ostriches were not necessarily barred from qualifying for the agricultural exemption before March 1990 — it says the March 1990 date is simply when this office began applying the exemption based on the Texas Department of Agriculture's published information, and points to Rule 3.296(a)(1) as the underlying basis that could support an earlier qualification date on the right facts.

Accountants and tax professionals advising ratite operations

Note the ALERT at the top of this STAR letter: Texas Tax Code provisions on the agricultural and timber sales tax exemption were amended by H.B. 268 (82nd Regular Legislative Session), effective January 1, 2012, to require persons claiming the exemption for certain agricultural and timber products to apply for and provide a Comptroller-issued registration number. This 1992 letter predates that requirement, so current transactions should be checked against the registration-number rule in addition to the reasoning in this letter.

Common questions

Q: When did the Texas Comptroller's office start applying the agricultural exemption to ostriches?
A: March 1990, after the Texas Department of Agriculture published information that ostriches were being raised for food for human consumption.

Q: Could ostriches have qualified for the agricultural exemption before March 1990?
A: The letter says this is not to say ostriches could not qualify prior to that date, citing Rule 3.296(a)(1).

Q: Does this exemption treatment extend to emus, rheas, and cassowaries too?
A: Yes. The letter describes ostriches, emus, rheas, cassowaries, and possibly others as members of the ratite group, and states the office extends the same treatment to them as to other animals processed as food for human consumption.

Q: Does the Comptroller's office agree that ratites are ordinarily considered food for human consumption?
A: Not necessarily — the letter is explicit that the office does not necessarily agree these birds ordinarily constitute food for human consumption, but it extends the exemption treatment to them anyway when they are processed as such.

Q: Does a 2011 law change affect reliance on this 1992 letter?
A: Yes, potentially. The STAR alert at the top of the letter notes that H.B. 268 (82nd Reg. Legislative Session, 2011) required persons claiming the agricultural/timber sales tax exemption to apply for and provide a Comptroller-issued registration number, effective January 1, 2012 — a requirement this 1992 letter does not address.

Q: Can I rely on this letter for my own ratite operation?
A: No. This opinion is based on the facts presented, and different though similar facts might lead to different answers; it can be relied on only by the taxpayer to whom it was issued.

Citations and references

• Rule 3.296(a)(1) — cited as the basis on which ostriches could potentially have qualified for the agricultural exemption even before March 1990.
• H.B. 268, 82nd Reg. Legislative Session (2011) — noted in the STAR system ALERT as having amended the Tax Code to require a Comptroller-issued registration number for certain agricultural and timber exemption claims, effective 01/01/2012 (added by STAR after original issuance; not part of the original 1992 letter text).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9207L1182B04

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.

July 6, 1992

Dear **:

This is in response to your letter dated June 15, 1992, asking on what date the
agricultural exemption began being applied to ostriches, emu, rhea, and
cassowaries in the State of Texas.

In March of 1990 this office received information published by the Texas
Department of Agriculture that ostriches are being raised for food for human
consumption. It was at that time this office began to apply the agricultural
exemption to ostriches.

This is not to say that ostriches could not qualify prior to that date. See
Rule 3.296 (a) (1).

As I understand it, the group of birds called ratites includes ostriches, emus,
rheas, cassowaries and possibly others. Although this office does not
necessarily agree that these birds 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.

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