Are repair labor and repair/maintenance parts (lubricants, filters, oil) for farm and ranch equipment exempt from Texas sales tax?

Plain-English summary

(Note: STAR carries an "ALERT" on this letter about a 2011 statutory amendment, H.B. 268, adding an agricultural/timber exemption registration-number requirement effective January 1, 2012 — over a decade after this 1999 letter. That's a STAR-added cross-reference, not part of the original ruling text, flagged here rather than folded into the 1999 analysis.)

Someone asked the Comptroller for general information on Texas sales and use tax treatment of repair and maintenance items used on agricultural equipment.

The Comptroller explained that Tax Code § 151.316 exempts machinery and equipment used exclusively on a farm or ranch to (A) produce food for human consumption, (B) produce grass, (C) produce feed for animal life, or (D) produce other agricultural products sold in the regular course of business, as well as equipment used to build or maintain roads or water facilities on the farm/ranch. Building on that base exemption: labor to repair or maintain exempt farm or ranch equipment is not taxable, and repair parts and maintenance items — lubricants, filters, oil, and similar items for farm machinery and for motor vehicles not licensed for highway use — used to repair or maintain that exempt equipment can be purchased tax-free by issuing the supplier an exemption certificate claiming the agricultural exemption.

What this means for you

Farmers, ranchers, and farm equipment service providers

If your machinery or equipment qualifies for the § 151.316 agricultural exemption (used exclusively for exempt farm/ranch production or road/water-facility maintenance), both the labor to repair or maintain it and the repair parts/consumables (lubricants, filters, oil) going into it are also exempt — issue your supplier an exemption certificate for the parts to buy them tax-free.

Accountants and tax professionals

This letter is a concise summary of how § 151.316's core exemption extends downstream to repair labor and repair/maintenance consumables, not just the initial equipment purchase — useful shorthand alongside the more detailed Rule 3.296 definitions covered in companion 1999 letters on fencing and other farm equipment categories.

Common questions

Q: Is labor to repair my exempt farm equipment taxable?
A: No — labor to repair or maintain equipment that itself qualifies for the § 151.316 agricultural exemption is not taxable.

Q: Can I buy lubricants, filters, and oil for my farm equipment tax-free?
A: Yes, as long as they're used to repair or maintain equipment that qualifies for the agricultural exemption, and you issue your supplier a properly completed exemption certificate.

Q: What has to be true for the underlying equipment to qualify in the first place?
A: It must be used exclusively on a farm or ranch to build/maintain roads or water facilities, or to produce food, grass, feed, or other agricultural products sold in the regular course of business.

Citations and references

Statute:

• Tex. Tax Code § 151.316 (agricultural machinery/equipment exemption)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9910759L

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.

October 7, 1999

<**>

Dear **:

This is in response to your request for a ruling on the following fact
situation and questions:

I would like information on the Texas state sales and use tax for both repair
and maintenance items used on Agricultural equipment. Please forward
information to: **

Response: Texas Tax Code section 151.316 provides an exemption for machinery
and equipment exclusively used or employed on a farm or ranch in the building
or maintaining of roads or water facilities or in the production of:

(A) food for human consumption,
(B) grass,
(C) feed for animal life; or
(D) other agricultural products to be sold in the regular course of business

Labor to repair or maintain exempt farm or ranch machinery or equipment is not
taxable. Repair parts and maintenance items (i.e., lubricants, filters, oil,
etc., for farm machinery and for motor vehicles not licensed for highway use)
used to repair or maintain exempt farm or ranch equipment may also be purchased
tax-free by issuing the supplier an exemption certificate claiming the
agricultural exemption.

The Texas Tax Code is available on the Internet at:
.

The State Tax Automated Research system may be accessed on the Internet at:

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Gilbert Zamora

Tax Policy