Can a horse or livestock trailer with built-in human living quarters qualify for Texas's farm-trailer motor vehicle tax exemption?

Plain-English summary

The Texas Comptroller said a livestock trailer with built-in human living quarters was presumed taxable when purchased. The buyer could obtain the farm-trailer exemption only by clearly proving at least 80% qualifying agricultural use.

Qualifying use meant transporting horses, livestock, or other agricultural products to and from market or farm or ranch property in the regular course of business. The buyer also had to own or lease a farm or ranch and regularly breed, raise, and sell the agricultural products.

Transportation to racetracks, rodeos, livestock shows, contests, and similar events did not count as exempt use, even for a farm or ranch operator.

Because living quarters created a presumption of taxability and the buyer bore the burden of proof, the dealer or county tax office had to collect the tax first. The buyer could then file a refund claim with the Comptroller, which would evaluate actual facts and usage.

What this means for you

Horse and livestock producers

Farm ownership alone is not enough. Keep mileage, trip-purpose, and business records capable of proving that at least 80% of the trailer's use directly serves qualifying production and market or farm transport.

Trailer dealers

The letter did not let the dealer simply accept the ordinary exemption form for a trailer with living quarters. It directed collection of tax, leaving the purchaser to establish the exemption through a refund claim.

Accountants and refund preparers

The exemption is narrowly construed and the claimant carries the proof burden. Separate commercial production transport from recreational, racing, rodeo, show, and contest trips.

Common questions

Q: Does a horse trailer lose exemption automatically because it has living quarters?

A: Not automatically, but it is presumed taxable and the purchaser must prove 80% qualifying use.

Q: Do trips to rodeos or livestock shows count?

A: No, according to this letter.

Q: Who qualifies as an original producer?

A: The letter describes a person who brings the agricultural product into being and owns it through processing, packing, or marketing, or a grower with predominant operational control and investment risk.

Q: Is tax paid at purchase or only if the exemption fails?

A: The letter directed collection at purchase, followed by a refund claim in which the buyer proves entitlement.

Citations and references

• Tex. Tax Code § 152.091
• 34 Tex. Admin. Code Rule 3.72(c)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=MVT
• Opinion: https://star.comptroller.texas.gov/view/200911531L

Original ruling text

November 12, 2009

Subject: 08193123-Taxability Of Horse Trailers With Living Quarters

Dear **:

I apologize for the delay in responding to your e-mail concerning whether the

purchase of a horse trailer with living quarters qualifies for the exemption

from motor vehicle sales tax as a farm trailer.

Response: A livestock trailer with built-in living quarters for humans is

presumed to be subject to Texas motor vehicle sales and use tax at the time of

purchase. To be exempt from Texas motor vehicle sales and use tax, the trailer

must be used 80 percent of the time to transport horses, livestock or other

agricultural products to and from market or to and from farm or ranch

properties in the regular course of business by a person who owns or leases a

farm or ranch and who is in the business of breeding, raising and selling

horses, livestock or other agricultural products in the regular course of

business. The burden is on the purchaser to clearly show that a livestock

trailer with built-in living quarters is used 80 percent of the time for an

exempt purpose. Transporting horses to race tracks, rodeos, livestock shows or

contests, etc. does not constitute an exempt use of the trailer even if the

purchaser owns or leases a farm or ranch and is in the business of raising and

selling agricultural products in the regular course of business.

Section 152.091 of the Texas Tax Code and Rule 3.72(c) exempt the sale, lease

or rental of a trailer or semi-trailer from motor vehicle sales and use tax if

the trailer or semi-trailer is used primarily (80 percent of the time) on a

farm or ranch by an original producer of food products for human consumption,

grass, feed for any form of animal life, or other livestock or agricultural

products to be sold in the regular course of business.

An original producer is any person who brings an agricultural product into

being, and is the owner of the agricultural product from the time it is brought

into being until it is processed, packed, or marketed; or is the grower of an

agricultural product, exercises predominant operational control over the

raising of the agricultural product, and bears a risk of loss of investment in

the agricultural product.

A farm or ranch is one or more tracts of land used to produce crops, livestock,

or other agricultural products to be sold in the regular course of business.

Farm or ranch also includes a dairy farm, commercial orchard, commercial

greenhouse, feedlot, and any similar commercial agricultural operation that is

an original producer of agricultural products.

A person claiming an exemption from motor vehicle sales and use tax for a

livestock trailer with built-in living quarters has the burden of establishing

its claim for the exemption directly to the Comptroller of Public Accounts.

Therefore, the motor vehicle sales tax must be collected by the selling dealer

and/or the local county tax assessor-collector. The purchaser may then file a

claim for refund with the Comptroller. The Comptroller will look to the facts

and circumstances along with the applicable law to determine if the clamed

exemption is valid. Statutory exemptions from taxation are subject to strict

construction since they are the antithesis of equality and uniformity and

because they place a greater burden on other taxpaying businesses and

individuals. An exemption cannot be raised by implication, but must

affirmatively appear, and all doubts are resolved in favor of the taxing

authority and against the claimant. In other words, the burden of proof is on

the person claiming the exemption from tax to clearly show that a livestock

trailer with built-in living quarters for humans is to be used 80 percent of

the time in an exempt manner and that the purchaser owns or leases a farm or

ranch and is in the business of breeding, raising and selling livestock or

other agricultural products in the regular course of business.

For online access to the section of the Tax Code and Rule noted above go to:

www.window.state.tx.us/taxinfo/mtr_veh/mv_su.html Scroll down to either

"Statutes" or “Rules” and click to open.

This opinion is based on the facts you submitted. Other facts, though similar,

may yield different results. I hope this information helps. If you have further

questions, please e-mail them to [email protected], or you may reach me

by phone at (800) 531-5441, ext. 3-4986.

Sign up for e-mail updates on the Comptroller topics of your choice at:

http://www.window.state.tx.us/subscribe

Sincerely,

Ken Koch

Tax Policy Division

From: **

Sent: Thursday, July 10, 2008 5:42 PM

To: Tax Help

Cc: **; **

Subject: sales tax determination

Concerning business: **, taxpayer number, **.

We (I) have spoken by phone to Ken Koch.

Our question was to get definition to the issue of sales tax collection on

trailer units that we may sell which might include Living Quarters built into

the trailer units. We anticipate that the majority of our customers will

request sales tax exemption claiming Farm or Ranch Use.

Our determination by phone was that the exemption was to be allowed provided

the customer filled out and signed the state form....14-305 (back). We, from

this point forward, will rely on this information for all sales conducted that

the customer makes such request, unless blatant abuse appears evident. These

forms will be retained by ** for any future documentation requests.

I request a return email in response to this email, so that this can be

documented, and, if the State has any questions to ask, to please do so by

email.

I await the formal response.

Sincerely,