What made the submitted agricultural exemption certificate acceptable to a Texas seller?

Plain-English summary

Later-law alert. STAR says H.B. 268 from the 2011 regular legislative session amended the Tax Code. Effective January 1, 2012, a person claiming exemption for certain agricultural and timber products had to apply for and provide a Comptroller-issued registration number.

The Comptroller found the submitted agricultural exemption form sufficient to relieve the seller from collecting tax when the purchaser completed it. The seller still had to act in good faith: the certificate had to be signed and dated, the merchandise had to be the kind that qualified for the claimed exemption, and the form had to be connected to the sales invoice.

The reproduced form invoked Rule 3.296 and listed categories such as specified fencing and livestock items, expendable agricultural supplies, specially designed agricultural structures, crop chemicals, qualifying production machinery, irrigation-system parts, and farm-equipment repair or replacement parts. The letter approved the submitted form but did not independently decide a specific purchase from every listed category.

Common questions

Did completing the form automatically protect the seller? Only when the seller acted in good faith and the goods fit the exemption. Did it need a signature and date? Yes. Did it need to connect to the invoice? Yes. Is the 1985 form necessarily enough today? STAR's later-law alert says registration-number requirements changed for certain products effective in 2012.

Citations and references

• 34 Tex. Admin. Code Rule 3.296 — cited by the reproduced agricultural exemption certificate.
• H.B. 268, 82nd Texas Legislature, Regular Session (2011) — identified in STAR's alert as adding registration-number requirements effective January 1, 2012.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8506L0647A08

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.

June 5, l985

Dear ***:

Thank you for your letter concerning the acceptability of a form
submitted by one of your members for the agricultural exemption.

The form submitted is sufficient to relieve the seller of the responsibility
of collecting sales tax when completed by the purchaser. The seller must act in
"good faith" when accepting the certificate. Part of that "good faith" is that it
be signed and dated and the merchandise must be of the kind that will qualify for
the exemption claimed. This certificate or form must be tied, somehow, to the sales
invoice.

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

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at the Tax
Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division

EXEMPTION CERTIFICATE

The undersigned hereby claims an exemption from payment of
taxes under Chapter 20, Title 122A, Limited Sales and Use Tax, for
the purchases of the taxable items, described below or on the
attached order or invoices, which will be purchased from:

This exemption is in accordance with Comptroller of Public Accounts,
Rule 3.296, Agriculture, Animal Life, Feed, Seed, Plants and Fertilizer.

I understand that I will be liable for payment of the Limited Sales and Use
Tax if I use the items in some other manner than in compliance with Rule 3.296.
Liability for the tax shall be based on the price paid for the taxable items.

It is a misdemeanor to give an exemption certificate to the seller for taxable
items which I know at the time of purchase will be used in a manner other than
that expressed in this certificate. and upon conviction I understand that I may
be fined up to $500.00 per offense.

The items purchased are claimed exempt from tax for the following reason(s):

( ) Fence wire, fence posts, pens, gates, vehicle-mounted fertilizer spreaders
not licensed for highway use, cattleguards, and chutes used in connection with
raising livestock or producing agricultural products.

( ) Machinery and equipment include expendable agricultural supplies such as:
hand tools, baling wire and binders twine; lubricants for farm machinery and for
motor vehicles not licensed for highway use; nuts, bolts, washers, and other
hardware; and materials and structural components used to construct those items
listed which are classified as machinery or equipment.

( )Automated laying houses, farrowing houses, greenhouses and other structures
which are designed for a specific agricultural purpose and cannot be economically
used for other purposes without major structural changes. Hay barns, machine shops,
livestock barns, etc., do NOT qualify for exemption as equipment.

( )Fungicides, insecticides, herbicides, defoliants and desiccants (drying agents)
used exclusively in agricultural production.

( ) Machinery or equipment used exclusively in the production of food, grass, feed
and other agricultural products or in building or maintaining roads and water facilities.

( ) Items specifically designed to be assembled into a machine such as parts of a
pumping system or portable irrigation system.

( )Repair or replacement parts used exclusively on farm or ranch machinery or
equipment, including tractor tires; tires used on motor vehicles not licensed for
highway use; and tires specifically designated by the manufacturer for farm or
off-highway use only.

Executed this ------ day of ------------- 19

Purchaser (Please print)

Signature

Address