Which conservation-district items and services were taxable, and which qualified for farm or ranch treatment?

Plain-English summary

The 1985 letter gave a use-dependent taxability list for items and services sold by soil and water conservation districts. Products used in producing food for human consumption could qualify for agricultural treatment, while products used solely to conserve water, prevent erosion, or for home use were taxable.

The letter treated fish for stocking farm ponds, agricultural grass seed, farm-use soil-moisture testing equipment, and conservation-equipment rentals used exclusively on a farm or ranch as not taxable. Fruit and nut trees, drip or trickle irrigation systems, fertilizer, and lime depended on use: home use was taxable, while qualifying agricultural-production use was not. Windbreak seedlings and corrugated steel pipe for drop-inlet structures were taxable.

Water-depletion information and irrigation-equipment efficiency testing were marked not taxable. Advertising-space sales were marked not taxable, but designing and selling an advertisement was taxable. The letter required signed exemption certificates for nontaxable sales except the items marked with an asterisk.

STAR adds an alert that H.B. 268 changed the Tax Code and, effective January 1, 2012, required people claiming exemptions for certain agricultural and timber products to apply for and provide a Comptroller-issued registration number. That alert means the 1985 procedures should not be treated as current without checking later law.

Common questions

Was fertilizer or lime always exempt? No. The letter treated home use as taxable and qualifying agricultural-production use as not taxable. Were conservation-equipment rentals exempt? Only when used exclusively on a farm or ranch. Did purchasers need documentation? The letter generally required a signed exemption certificate, and STAR separately warns of registration-number requirements effective in 2012.

Citations and references

The reproduced letter cites no numbered statute or rule. Its STAR alert identifies H.B. 268 from the 82nd Regular Legislative Session and a January 1, 2012 effective date.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8505L0670E09

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 8, 1985

Gentlemen:

It has come to our attention that you may be selling items or providing
services that are subject to the Texas limited sales tax. If this is the case,
you need a Texas sales and use tax permit if you don't already have one.

As you know, many products are exempt from sales tax when used in the
production of food for human consumption. But, when these products are used
solely to conserve water and prevent soil erosion (e.g., home use), they are
subject to tax.

I have enclosed a list of items commonly sold by your districts in Texas.
Included is their taxability status according to use. The agriculture ruling
has been provided for your information.

If you are selling taxable items and need a permit, please complete the
enclosed sales tax application and return it to me. Special instructions have
been attached to help you complete the form.

If you have any questions, please call me on our toll-free number
1-800-252-5555, ext. 325, from anywhere in Texas.

Sincerely,

Carol Willis
Tax Administration

ITEMS SOLD BY SOIL AND WATER CONSERVATION DISTRICT'S

1. Fish for stocking farm ponds - not taxable

2. Seedlings for wind breaks - taxable

3. Fruit and nut trees

(a) home use - taxable

(b) agricultural production - not taxable if the products are sold in the
regular course of purchaser's business

4. Drip or trickle irrigation systems a) home use - taxable b) agricultural
   production - not taxable

5. Grass seed for agricultural production - not taxable

6. Fertilizer and lime for agricultural production

(a) home use -taxable

(b) agricultural production - not taxable

7. Soil moisture testing equipment - not taxable for farm use

8. Corrugated steel pipe for drop inlet structures - taxable

9. Sale of water depletion information for income tax purposes (service) - *not
   taxable

10. Efficiency test or irrigation equipment (service) - *not taxable

11. Rental of conservation equipment - not taxable if used exclusively on a
    farm or ranch

12. Sale of advertising in newsletters or other publications

(a) *not taxable if sale of advertising space

(b) taxable for the design and sale of an ad

• You must get a signed exemption certificate from your purchasers for the
  sale of any non-taxable items with the exception of those marked with an
  asterisk.