Are repair and replacement parts for farm trucks and trailers exempt from Texas sales tax if the vehicles have farm license plates?

Subject

Motor Vehicle — Farm And Ranch Exclusively Used — Repair/Replacement/Maintenance Parts

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9401L1284B12

Plain-English Summary

The Texas Comptroller answered two questions from a taxpayer about sales tax on farm-related transactions.

On the main question — whether parts used to maintain and repair trailers and trucks with farm license plates are exempt from sales tax — the Comptroller drew a clear line based on licensing, not on the type of tag. Repair and replacement parts for a motor vehicle can only be purchased tax-free if the vehicle is (1) exclusively used on the farm and (2) not licensed for highway use at all, whether under a regular tag or a farm tag. In other words, repair and replacement parts for unlicensed vehicles used exclusively on farms or ranches are exempt, but repair and replacement parts for licensed vehicles used on farms and ranches are taxable — even if those vehicles display farm tags. The Comptroller pointed the taxpayer to Rule 3.296(g)(4) (Agriculture, Animal Life, Feed, Seed, Plants, and Fertilizer) for the underlying rule.

On the second question, the Comptroller confirmed that a consignment fee charged simply for bringing a buyer and seller together — where the buyer and seller otherwise handle the transaction themselves — is not taxable.

The letter also notes that the most current version of Rule 3.72 (Farm Trailers), as of the ruling, was the March 10, 1982 revision.

What This Means For You

If you own or operate licensed farm trucks or trailers (including those with farm tags): Repair and replacement parts you buy for these vehicles are taxable. Having a farm tag does not by itself create a sales tax exemption — the vehicle must also be unlicensed for highway use.

If you own unlicensed vehicles used exclusively on the farm or ranch: Repair and replacement/maintenance parts for those vehicles can be purchased tax-free, because the vehicle is not licensed for highway use at all.

If you receive a consignment fee for simply introducing a buyer and seller (without otherwise handling the sale), that fee is not subject to Texas sales tax.

Note: The Comptroller's website flags this 1994 letter as potentially affected by later legislation — H.B. 268 (82nd Regular Legislative Session, 2011) added a requirement that persons claiming certain agricultural and timber product sales tax exemptions apply for and provide a Comptroller-issued registration number, effective January 1, 2012. Confirm current registration requirements with a tax professional before relying on this letter.

Q&A

Q: My truck has farm license plates. Are repair parts for it tax-exempt?
A: Not necessarily. Under this ruling, having farm tags is not enough — the vehicle must also be unlicensed for highway use. Repair and replacement parts for licensed vehicles used on farms and ranches are taxable even with farm tags.

Q: What vehicles actually qualify for tax-free repair and replacement parts?
A: Only vehicles that are exclusively used on the farm and are not licensed for highway use at all (neither a regular tag nor a farm tag). Repair and replacement parts for those unlicensed, farm-exclusive vehicles are exempt.

Q: Is a fee for connecting a buyer and seller on a consignment deal taxable?
A: No. The Comptroller confirmed that a consignment fee charged for bringing the buyer and seller together, where the transaction itself is handled by the buyer and seller, is not taxable.

Citations

• 34 Tex. Admin. Code § 3.296(g)(4) (Agriculture, Animal Life, Feed, Seed, Plants, and Fertilizer)
• 34 Tex. Admin. Code § 3.72 (Farm Trailers)

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 31, 1994

Dear *****:

I have received your letter regarding sales tax exemptions. Your questions
are listed below, followed by the responses.

Question 1: Are parts used for maintenance and repair of trailers and trucks
with farm license plates exempt from sales tax when the owner says he uses
these vehicles exclusively for farm or ranch use?

Response: Parts used for maintenance and repair of a motor vehicle may be
purchased tax free only if the vehicle is exclusively used on the farm and
is not licensed for highway use (including both regular tags or farm tags).
Repair and replacement parts for unlicensed vehicles which are used
exclusively on farms or ranches are exempt. Repair and replacement parts
for licensed vehicles used on farms and ranches are taxable, even if they
have farm tags. See enclosed Rule 3.296(g)(4), Agriculture, Animal Life,
Feed, Seed, Plants, and Fertilizer.

Question 2: Is sales tax due on a consignment fee charged for bringing buyer
and seller together where the transaction is handled by buyer and seller only?

Response; The consignment fee charged for bringing the buyer and seller together
is not taxable.

Your final request was for a copy of the latest revision of Rule 3.72, Farm
Trailers. The March 10, 1982, version is the most current, a copy is enclosed.

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

If you have any questions, please don't hesitate to write the Tax
Administration Division or call one of our tax specialists toll at
1-800-252-5555.

Sincerely,

Joan Hale
Tax Administration Division

NOTE: Previous Accession Number 9401014L