How could a farm credit bank claim its Texas sales-tax exemption on tangible personal property purchases?

Plain-English summary

Federal and state banks generally were not exempt, but federal law specifically exempted farm credit banks from state and local taxes.

The bank had to give the seller a completed exemption certificate. A bank letter was not acceptable. The certificate needed to cite 12 U.S.C. § 2023, describe the items, and be signed and dated.

What this means for you

Exempt status did not remove the prescribed documentation requirement.

Common questions

Was a bank letter enough? No.

What did the certificate need? The statutory reason, item description, signature, and date.

Citations and references

• 12 U.S.C. § 2023

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9204L1164A05

Original ruling text

April 7, 1992

Dear **:

Thank you for your recent letter asking about the sales tax exemption
for farm credit banks and the correct method of claiming a sales tax
exemption.

The acceptable method for claiming a sales tax exemption is for the
entity claiming the exemption to complete an exemption certificate in
lieu of tax. A letter from the bank is not an acceptable exemption
certificate.

Federal and state banks are generally not exempt from the Texas sales
tax on their purchases of tangible personal property. However, the
federal statutes specifically exempts farm credit banks from state
and local taxes.

If a farm credit bank, such as your customer Farm Credit Bank of Texas
in Austin, Texas, wishes to claim a sales tax exemption for tangible
personal property purchased from you, the bank should complete an
exemption certificate for your files.

In the section of the exemption certificate, "Purchaser claims this
exemption for the following reasons," the bank should state, "Exempt
from state and local taxation under 12 U.S.C 2023." The bank should
also describe the items being purchased and sign and date the
certificate for your files.

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

If you have any additional questions or need more information, you
may call me at 463-4633. You may also write to the Tax Administration
Division.

Sincerely,

Wanda Hutcheson
Tax Administration Division