New Changes to Texas Agricultural Exemption Beginning January 2012

Texas has passed new legislation requiring registration and new exemption certificates for Agricultural Tax Exemption claims that goes into effect January 1, 2012.

House Bill 268, passed during the 82nd Regular Legislative Session, requires, beginning Jan. 1, 2012, that a person claiming an exemption from sales tax on the purchase of certain items used in the production of agricultural and timber products must provide a registration number issued by the Comptroller of Public Accounts on the exemption certificate issued to the seller.

Exemption Certificates

Also beginning Jan. 1, 2012, purchasers claiming an exemption on qualifying items used in the production of food or other agricultural products are required to issue the new Texas Agricultural Sales and Use Tax Exemption certificate, Form 01-924 (PDF, 297KB).

Purchasers of qualifying items used in the production of timber products must issue the new Texas Timber Operations Sales and Use Tax Exemption Certificate, Form 01-925 (PDF, 270KB).

The generic exemption certificate, form 01-339, should not be used to claim either the agricultural or timber exemptions on purchases made on or after Jan. 1, 2012. Blanket exemption certificates issued to suppliers on the old form must also be updated and replaced with new certificates for purchases made on or after Jan. 1, 2012.

Do I need a registration number?

Beginning Jan. 1, 2012, if you claim an exemption from sales tax on the purchase of certain items used in the production of agricultural and timber products, yes. In the Texas 82nd Regular Legislative Session, a bill was passed (House Bill 268) that requires a person claiming an exemption from sales tax on such purchases must provide a registration number issued by the Comptroller of Public Accounts on the exemption certificate issued to the seller. The Comptroller will provide a registration number to you upon your successful application for registration.

What types of items are subject to this requirement?

A registration number will be required in order to claim an exemption from Texas sales and use tax when purchasing the following goods and services:

  • fertilizers, fungicides, insecticides, herbicides, defoliants and desiccants used exclusively in the production of timber for sale, or on a commercial farm or ranch in the production of food or other agricultural products for sale;
  • machinery and equipment (including component parts) used exclusively in the production of timber, or on a commercial farm or ranch in the production of food or other agricultural products for sale or the building or maintaining of roads and water supplies;
  • machinery and equipment used by an original producer for packing and processing agricultural or timber products;
  • machinery and equipment used exclusively in an agricultural aircraft operation, as defined by 14 C.F.R. Section 137.3 (crop dusting);
  • tangible personal property incorporated into a structure used for poultry carcass disposal;
  • components of irrigation systems used in the production of food and other agricultural and timber products for sale;
  • seedlings used in the production of timber for sale;
  • electricity used in agriculture or timber operations;
  • services performed on exempt tangible personal property identified in this list; and,
  • farm, timber and off-road motor vehicles.

What types of items are not subject to this requirement?

A registration number is not required for the following types of agricultural items:

  • horses, mules and work animals commonly used in agricultural production;
  • animal life, the products of which ordinarily constitute food for human consumption, such as cattle, hogs, goats, sheep, chickens and turkeys;
  • feed, including oats, corn, chicken scratch and hay, for farm and ranch animals and wildlife;
  • feed for animals held for sale in the regular course of business;
  • seeds and annual plants, the products of which are commonly recognized as food for humans or animals, or are usually only raised to be sold in the regular course of business such as corn, oats soybeans and cotton seed; and,
  • ice used exclusively by commercial fishing boats in storing aquatic species including, but not limited to, shrimp and other crustaceans, finfish, mollusks and similar creatures.

Who is eligible for a registration number?

A person, including a non-Texas resident, engaged in the production of agricultural or timber products for sale in the regular course of business is eligible for a registration number that can be used to claim an exemption from Texas sales tax on the purchase of qualifying items included for eligibility for registration numbers are persons in these groups:

  • farmers and ranchers who raise agricultural products to sell to others
  • persons engaged in aquaculture and apiculture; (i.e. commercial fish farms or bee keepers)
  • custom harvesters;
  • persons engaged in agricultural aircraft operations, as defined by 14 C.F.R. Section 137.3 (crop dusting);
  • commercial nurseries engaged in fostering growth of plants for sale (i.e., growing stock from seed or cuttings, replanting seedlings in larger containers); and,
  • timber producers, including contract lumberjacks.

Who is NOT eligible for a registration number?

A person who is not engaged in the production of agricultural or timber products for sale is not eligible for a registration number and may not claim an exemption from tax when purchasing the items noted above. Examples of the types of activities that do not qualify for exemption include home gardening; horse racing; florists or similar retailers who only store or maintain plants prior to sale; wildlife management and/or land conservation; maintenance or operation of hunting and fishing leases; horse boarding; trail rides; commercial fishing; dog breeding and pet kennels.

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