Can a farmer or rancher file a single agricultural/farm-purposes exemption certificate with a retailer and then just sign later invoices marked 'Exempt agricultural purposes,' instead of filing a new certificate for every purchase?

Plain-English summary

A retailer wrote to the Comptroller's office asking about accepting farm and ranch related exemption certificates, referencing an enclosed "counter ticket" that wasn't actually included with the correspondence. The Comptroller's response explains how the agricultural/farm-purposes exemption certificate process works.

ALERT (from STAR): This document may be affected by changes to the Tax Code made by H.B. 268, 82nd Reg. Legislative Session, 2011, effective 01/01/2012, which 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. This 1992 letter predates that requirement, so it does not reflect current law on agricultural exemption registration numbers.

Under the procedure described in the letter, a farmer or rancher used to have to file a properly completed exemption certificate with the retailer each time they bought a tax-exempt item. The letter explains that this changed: now the farmer or rancher may instead file one exemption certificate that the retailer keeps on file, and afterward the purchaser can simply sign later invoices that are stamped "Exempt agricultural purposes," rather than filling out a new certificate for every purchase. The letter points to Rule 3.287 (form and contents of a valid exemption certificate, with a suggested certificate attached) and Rule 3.296, Section (d) (the agricultural exemption procedure described above). It also reminds retailers that they should not accept certificates or allow exempt sales that have no legal basis for exemption.

What this means for you

Retailers selling to farmers and ranchers

You are not required to collect a brand-new exemption certificate on every sale to a qualifying farm/ranch customer. Once that customer has filed one properly completed exemption certificate with you (which you keep on file), you can let them sign subsequent invoices stamped "Exempt agricultural purposes" instead. You should still refuse to accept certificates or make exempt sales that have no basis for exemption under the law.

Farmers and ranchers making tax-exempt purchases

You can file a single exemption certificate with a retailer you buy from regularly, rather than completing a new certificate for every individual purchase. After that initial certificate is on file, you can sign the retailer's invoices (stamped "Exempt agricultural purposes") for later purchases.

Accountants and tax professionals advising agricultural clients

Be aware this 1992 letter's procedure (one certificate on file, then signed stamped invoices) predates the 2012 registration-number requirement under H.B. 268 (82nd Legislative Session). Current agricultural/timber exemption practice requires an Ag/Timber registration number issued by the Comptroller — this letter should not be relied on for that current requirement.

Common questions

Q: Does a farmer or rancher have to file a new exemption certificate with a retailer every time they make a tax-exempt purchase?
A: No, per this letter. They can instead file one properly completed exemption certificate with the retailer, who keeps it on file, and then sign subsequent invoices stamped "Exempt agricultural purposes."

Q: What rule governs the form and contents of a valid agricultural exemption certificate, according to this letter?
A: The letter cites Rule 3.287, which discusses the necessary form and contents for a valid exemption certificate and includes a suggested certificate attached to the rule.

Q: What rule discusses the agricultural exemption procedure of filing one certificate and later signing stamped invoices?
A: The letter cites Rule 3.296, specifically Section (d), concerning agricultural exemptions.

Q: Can a retailer accept any certificate a farm or ranch customer presents?
A: No — the letter states retailers should not accept certificates or exempt sales that have no basis for exemption under the law. Rule 3.296 discusses the exemptions actually available to farmers and ranchers.

Q: Does this 1992 letter reflect current Texas law on agricultural exemptions?
A: Not entirely. STAR's own alert on this letter notes the Tax Code was later amended by H.B. 268 (82nd Reg. Legislative Session, 2011), effective January 1, 2012, which added a requirement that persons claiming this exemption apply for and provide a Comptroller-issued registration number — a step this 1992 letter does not address.

Q: Can I rely on this letter for my own business's exemption-certificate practices?
A: No. This opinion is based on the facts presented to the Comptroller in 1992, and it can be relied on only by the taxpayer to whom it was issued; also note the later statutory amendment described in the ALERT above.

Citations and references

No statutes were cited in the letter's body text itself. The letter references two Comptroller rules by number: Rule 3.287 (form and contents of a valid exemption certificate) and Rule 3.296 (agricultural exemptions, including the certificate-on-file procedure in Section (d)). The STAR system's own ALERT banner on this document also references H.B. 268, 82nd Reg. Legislative Session (2011).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9207L1186B13

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.

July 21, 1992

Dear **:

Thank you for your letter of May 19, 1992, concerning the acceptance of farm
and ranch related exemption certificates.

Your letter referenced an enclosed "counter ticket". This form was not in
evidence in the documentation I received, however, I believe I can resolve your
questions.

I have enclosed Rule 3.287 which discusses the necessary form and contents for
a valid exemption certificate. A suggested certificate is attached to the rule.
In the past, farmers or ranchers filed a properly completed certificate with
the retailer each time they bought a tax-exempt item. Now they may file an
exemption certificate which the vendor will keep on file. The vendor may then
simply allow the purchaser to sign subsequent invoices that are stamped with
the words "Exempt agricultural purposes". I have enclosed Rule 3.296,
concerning agricultural exemptions. Section (d) discusses this procedure.

Retailers should not accept certificates or exempt sales which have no basis
for exemption under the law. Rule 3.296 discusses the exemptions available to
farmers and ranchers.

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

You may call me toll free at 1-800-252-5555, ext. 5-0613. The direct line is
512/475-0613. You may also write to Tax Administration Division, Comptroller of
Public Accounts.

Sincerely,

Kevin Koller
Tax Administration Division