Is a golf cart converted into a farm utility vehicle (with pickup bed, tractor tires, and lighting) exempt from Texas sales tax when sold to a farmer or rancher?

Plain-English summary

A company that converts standard golf carts into farm utility vehicles — adding a pickup bed, tractor tires, and a lighting system — asked the Comptroller whether selling these converted carts to farmers or ranchers is subject to Texas sales tax. The company explained that cattle ranchers, horse breeders, and emu and ostrich ranchers use these vehicles for feed lot duties, valuing their quiet operation, narrow width, load capacity, and trailer-pulling ability.

The Comptroller's answer: a farmer or rancher is not automatically exempt from Texas sales tax just by virtue of being a farmer or rancher. The converted golf cart can qualify for the agricultural exemption, but only if two conditions are met — it must be used on a farm or ranch (as defined in Rule 3.296(f)) exclusively in the production of agricultural products that will be sold in the regular course of business (per Rule 3.296(a)(5)), and the buyer must give the seller a properly completed exemption certificate. The letter is itself a corrected reissue of an earlier May 9, 1994 letter from the same office, revising the third sentence of the response for clarification; both versions reach the same substantive conclusion.

What this means for you

Golf cart converters and dealers selling to farmers/ranchers

You cannot treat a sale to a farmer or rancher as automatically tax-exempt. The exemption depends on the buyer's actual use of the vehicle (exclusively on a farm or ranch, in producing agricultural products for sale) and on obtaining a properly completed exemption certificate from the buyer at the time of sale. Without that certificate, the sale is presumed taxable.

Farmers and ranchers buying converted utility vehicles

If you intend to use a converted golf cart exclusively for agricultural production activities on your farm or ranch (such as feed lot duties), you may be able to buy it tax-free by issuing a properly completed exemption certificate to the seller. Mixed-use vehicles (e.g., also used for personal or non-agricultural purposes) risk losing the exemption because the rule requires exclusive agricultural use.

Accountants and tax professionals advising agricultural clients

This letter illustrates that Texas's agricultural exemption under Rule 3.296 turns on the item's actual function and use, not the buyer's occupation. When advising on equipment purchases like modified vehicles, confirm both the "farm or ranch" definition in Rule 3.296(f) and the "exclusive use in agricultural production for sale" test in Rule 3.296(a)(5) are satisfied, and ensure the exemption certificate paperwork is in order.

Common questions

Q: If I'm a rancher, am I automatically exempt from sales tax on farm equipment purchases?
A: No. The Comptroller specifically states a farmer or rancher is not automatically exempt from Texas sales tax. Exemption depends on the item's qualifying use and a properly completed exemption certificate.

Q: What has to be true for the converted golf cart to qualify for the agricultural exemption?
A: It must be used on a farm or ranch (as defined in Rule 3.296(f)) exclusively in the production of agricultural products to be sold in the regular course of business (Rule 3.296(a)(5)), and the buyer must provide a properly completed exemption certificate to the supplier.

Q: Why are there two dates and two letters in this ruling?
A: The May 19, 1994 letter is a corrected reissue of an earlier May 9, 1994 letter from the same office. The Comptroller revised the third sentence of the response for clarification; both letters reach the same conclusion about conditional exemption eligibility.

Q: Does this ruling guarantee tax-exempt treatment for all similar converted vehicles?
A: No. The Comptroller notes the opinion is based on the facts as stated, and could change if additional facts are present. It also only reflects law as of 1994; note the STAR ALERT about H.B. 268 (82nd Legislature, 2011), which added a registration-number requirement for claiming certain agricultural exemptions effective 01/01/2012.

Citations and references

• 34 Tex. Admin. Code § 3.296(a)(5) (agricultural exemption requires exclusive use in producing agricultural products for sale)
• 34 Tex. Admin. Code § 3.296(f) (definition of "farm or ranch" for agricultural exemption purposes)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9405339L

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.

May 19, 1994

Dear *****:

This is a follow-up to my May 9, 1994, letter to you. I have revised my earlier
letter for clarification purposes. Change has been made to the third sentence
in the response. The original letter is corrected and restated below.

I have received your letter regarding the taxability of the sale of converted
golf carts to be used on farms or ranches.

Facts: You state that you convert golf carts for the express purpose as a farm
utility vehicle, with a pick up bed, tractor tires and lighting system. This
product is typically used by cattle ranchers, horse breeders, emu and ostrich
ranchers for feed lot duties because of its quiet operation, narrow width, load
capacity and trailer pulling ability. You request the taxability of the sale of
one of these carts to a farmer or rancher.

Response: Enclosed is a copy of Rule 3.296, Agriculture, Animal Life, Feed,
Seed, Plants, and Fertilizer. A farmer or rancher is not automatically exempt
from the payment of the Texas sales tax. The converted golf cart could be
eligible for the agricultural exemption if it is used on a farm or ranch [as
defined in Rule 3.296(f)] exclusively in the production of agricultural
products to be sold in the regular course of business [see Section
3.296(a)(5)]. The buyer must issue a properly completed exemption certificate
to the supplier.

This opinion is based on the facts as stated. If there are additional 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 free at
1-800-252-5555.

Sincerely,

Joan Hale
Tax Administration Division

May 9, 1994

Dear *****:

I have received your letter regarding the taxability of the sale of converted
golf carts to be used on farms or ranches.

Facts: You state that you convert golf carts for the express purpose as a farm
utility vehicle, with a pick up bed, tractor tires and lighting system. This
product is typically used by cattle ranchers, horse breeders, emu and ostrich
ranchers for feed lot duties because of its quiet operation, narrow width, load
capacity and trailer pulling ability. You request the taxability of the sale of
one of these carts to a farmer or rancher.

Response: Enclosed is a copy of Rule 3.296, Agriculture, Animal Life, Feed,
Seed, Plants, and Fertilizer. A farmer or rancher is not automatically exempt
from the payment of the Texas sales tax. To be eligible for an agricultural
exemption, the item purchased must be considered machinery or equipment used on
a farm or ranch [as defined in Section 3.296(f)] and used exclusively in the
production of agricultural products to be sold in the regular course of
business [see Section 3.296(a)(5)], and a properly completed exemption
certificate must be submitted to the supplier by the purchaser. [A farm or
ranch is defined in Section 3.296(f).]

This opinion is based on the facts as stated. If there are additional 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 flee at
1-800-252-5555.

Sincerely,

Joan Hale
Tax Administration Division