Which tractors, harvesters, bins, dollies, trailers, repairs, labor, and freight qualified for Texas agricultural exemptions?

Plain-English summary

Section 151.316 exempted qualifying property, not farmers or ranchers as people. The property had to be used exclusively to produce agricultural products for sale in the regular course of business.

Purchased and leased tractors, tractor accessories, a planter with insecticide attachment, and mechanical greens and spinach harvesters qualified if used exclusively in agricultural production. Wooden harvesting bins bought before August 29, 1983 were taxable; bins bought on or after that date were exempt under Section 151.333.

Dollies used both on the farm and to transport fruits and vegetables to a plant were taxable because their use was not exclusive. The trailers fell under motor-vehicle sales-and-use tax and were exempt if used primarily for farming and ranching.

When equipment qualified, its repair parts, labor, and freight also qualified, with one stated exception: repair parts for trailers or semi-trailers not used exclusively on the farm were taxable. Labor to repair a trailer or semi-trailer was not taxable.

STAR adds a later-law alert that H.B. 268 required a Comptroller registration number for certain agricultural and timber exemptions beginning January 1, 2012.

Common questions

Did the listed tractors and harvesters qualify? Yes, if used exclusively in agricultural production for sale.

Were all wooden bins treated alike? No. The letter used August 29, 1983 as the dividing date.

Why were the dollies taxable? They were also used to transport produce to the plant.

What test applied to the trailers? Primary use for farming and ranching under the motor-vehicle tax rule described.

Was trailer repair labor taxable? No.

Citations and references

• Tex. Tax Code § 151.316 — agricultural production equipment.
• Tex. Tax Code § 151.333 — wooden bins purchased on or after August 29, 1983.
• H.B. 268, 82nd Texas Legislature, 2011 — later registration requirement stated in STAR's alert.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8605L0736C12

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 6, 1986

Dear ***:

Thank you for your letter of April 18, 1986, concerning tax on machinery
and equipment used in the production of agricultural products.

The agriculture exemption as provided by Tex. Tax Code sec. 151.316, does
not exempt "farmers" and "ranchers" from tax; the statute exempts certain
tangible personal property provided the items are used exclusively in the
production of agricultural products, for sale in the regular course of
business.

Below is your list of equipment.

Some of the equipment involved in the harvest process include:

8 Purchased tractors
6 Leased tractors
Tractor accessories
1 Planter and insecticide attachment
2 Mechanical harvesters for greens and spinach."

These items qualify for the exemption as machinery and equipment if they
are used exclusively in the production of agricultural products for sale.

"300 Wooden bins to harvest turnip roots, squash and broccoli"

Any wooden bins purchased prior to August 29, 1983, are subject to tax.
Any wooden bins purchased on or after August 29, 1983, are exempt under
151.333.

"3 Dollies which are large hitches to hook on and move trailers"

The dollies will be subject to tax because they are not used exclusively
on the farm, but are also used in transporting the fruits and vegetables to
your plant.

"12 21' trailers on which to carry wooden bins"

These trailers are taxed under the motor vehicles sales and use tax
statute. Under this statute, the trailers will be exempt from tax if they
are used primarily for farming and ranching.

"In association with the aforementioned harvesting equipment we have
repair parts and labor, service (tractor tire changes in the field, fluid
changes, etc.) tires, tubes and freight."

If the equipment qualifies for the exemption, then the repair parts,
labor and freight qualify for the exemption with one exception. Repair parts
for trailers or semi-trailers not used exclusively on the farm will be
subject to tax. No tax is due on the labor to repair a trailer or semi-trailer.

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
1-800-252-55S5 toll free from anywhere in Texas. You may write us at
the Tax Administration Division.

Sincerely,

Tax Administration Division