Is a four-wheel ATV bought for use on a farm or ranch exempt from Texas sales tax?

Plain-English summary

This letter carries a STAR currency ALERT — see the note below before relying on the exemption-certificate procedure as complete.

A taxpayer wrote the Comptroller's office asking about a sales tax exemption for a four-wheel ATV bought for farm or ranch use. The letter announces a policy change: farmers and ranchers no longer need to write to the Comptroller's office in advance to get the exemption. Instead, a dealer who receives a valid, properly completed agricultural exemption certificate from the farmer or rancher has sufficient documentation to sell the ATV tax-exempt at the time of purchase, or the buyer can present the certificate to the dealer afterward to get a sales tax refund.

The exemption is not automatic just because the ATV will be used on a farm or ranch, however. Texas sales tax law does not allow an agricultural exemption for machinery or equipment used for both agricultural and non-agricultural purposes — recreation is specifically called out as a disqualifying use. To qualify, the ATV must be used exclusively on the farm or ranch in the production of agricultural products that are held for sale in the regular course of business.

The letter closes with the standard caveat that the opinion is based on the facts the taxpayer submitted, and that different facts could yield a different result.

ALERT: STAR flags that this 1994 letter predates H.B. 268 (82nd Reg. Legislative Session, 2011), which added a requirement — effective January 1, 2012 — that anyone claiming a sales tax exemption on certain agricultural and timber products apply for and provide a registration number issued by the Comptroller. This letter's description of the exemption-certificate procedure does not account for that registration-number requirement, so it should not be relied on alone for current agricultural-exemption paperwork.

What this means for you

Farmers and ranchers buying an ATV

You can get the sales tax exemption by giving the dealer a properly completed agricultural exemption certificate at the time of purchase, rather than writing to the Comptroller first. If you already paid tax, you can present the certificate to the dealer to request a refund. But the exemption only holds up if you use the ATV exclusively for agricultural production of goods held for sale — not for any recreational or personal use, even occasional.

ATV and powersports dealers

A validly completed exemption certificate from a farmer or rancher customer is sufficient documentation on your end to sell the ATV without collecting sales tax, or to process a refund of tax already collected. You do not need to separately verify the purchase with the Comptroller's office the way earlier policy required.

Anyone using farm equipment for mixed personal/business purposes

This letter is a reminder that Texas's agricultural exemption is an exclusive-use test, not a primary-use test. Equipment used partly for agricultural production and partly for something else (recreation is the example given here) does not qualify for the exemption at all.

Common questions

Q: Do I need to contact the Texas Comptroller's office before buying a tax-exempt ATV for my ranch?
A: No. Under the policy described in this letter, you can simply give the dealer a properly completed agricultural exemption certificate at the time of sale.

Q: I bought an ATV and use it mostly for ranch work but sometimes ride it for fun. Does it still qualify for the exemption?
A: No. The letter states the exemption does not apply to machinery or equipment used for both agricultural and non-agricultural purposes, such as recreation. The ATV must be used exclusively in agricultural production.

Q: What if I already paid sales tax on the ATV before getting an exemption certificate?
A: The letter says you may present a properly completed exemption certificate to the dealer to get your sales tax refund from the dealer.

Q: Does this exemption apply to bikes and trykes used on a farm or ranch too, or just four-wheel ATVs?
A: This particular letter addresses a four-wheel ATV specifically; the same exclusive agricultural-use standard would govern similar off-road vehicles, but the original text here only discusses the ATV the taxpayer asked about.

Citations and references

Superseded / supplemented reference (per STAR ALERT on this letter):

• H.B. 268, 82nd Reg. Legislative Session (2011) (added ag/timber exemption registration-number requirement, eff. 01/01/2012)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9405L1299B13

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 5, 1994

Dear **:

Thank you for your letter requesting exemption from sales
tax on your recent purchase of a four wheel ATV. We have
changed our policy that required farmers or ranchers to
write our office in order to obtain an exemption when
purchasing an ATV. A dealer who has a valid and properly
completed exemption certificate from the farmer or rancher
has sufficient documentation to exempt the purchase
of the ATV.

You may present a properly completed exemption certificate
to the dealer so that you may get your sales tax refund from
the dealer. I have enclosed an exemption certificate for
your convenience.

Please remember, the sales tax law does not allow an
agricultural exemption for machinery or equipment used for
both agricultural and non-agricultural purposes, such as
recreation. The ATV must be used on the farm or ranch
exclusively in the production of agricultural products to be
held for sale in the regular course of business.

This opinion is based on the facts you submitted. Other
facts, though similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 5-0030.
The direct line is 512/475-0030. You may also write to Tax
Administration, Comptroller of Public Accounts.

Sincerely,

David Somerville
Tax Administration Division

NOTE: Previous Accession Number 9405310L