Changes to the Texas Sales Tax Exemption for Agricultural Use

House Bill 268 went into effect September 1, 2011, and it makes several significant changes to the Texas Sales Tax for Agricultural Use Exemptions. Although the law went into effect September 1, 2011, actual implementation will not occur until January 1, 2012. This additional time gives us a bit of breathing room to get up to speed. Before the implementation, the Texas Comptroller of Public Accounts is developing revised forms, rules and policy books. In the meantime, we would like to take a look at what the changes will mean to our Ag Producers.

These are the things that must be done in order to be in compliance with the new law:

1.       All Ag producers must submit an Application for a Texas Agricultural and Timber Exemption Registration Number.  The state will issue a registration number and registration cards to the producer once they are approved.

2.       There is also a new Texas Agricultural Sales and Use Tax Exemption Certification form.  Every Ag producer will also need to complete a new tax exemption form when making a purchase.  This new form requires the tax exemption registration number so you must have this registration number before completing this form and making a purchase.

There are more resources on the State of Texas Tax website at http://window.state.tx.us/taxinfo/agriculture/  and assistance through the contact number:  1-800-252-5555 to answer questions.  Ag producers can complete the application form for the registration number on line at the state website.  It only takes 10 – 15 minutes to complete the application on-line.

There are also new considerations concerning what is considered exempt purchases. Going forward, the law states that Lawn Equipment, Lawn Equipment Parts, and Lawn Equipment Service Charges are taxable purchases.

Here is an excerpt from The Texas Comptroller of Public accounts State Website that details why lawn equipment is no longer exempt:

Machinery and equipment that can be exempt include:

• Repair and replacement parts for machinery or equipment used exclusively on a farm or ranch, including tractor tires, tires used on motor vehicles not licensed for highway use and tires specifically designated by the manufacturer for farm use only;

Some items used in agricultural production are not exempt from sales tax:

• Machinery and equipment used only part of the time in agricultural production (for example, tractors are subject to tax if used for mowing both production areas like pastures as well as non-production areas around buildings or highway rights-of-ways).

More information can be found at http://www.window.state.tx.us/taxinfo/taxpubs/tx94_101.html

At Coufal-Prater, we are committed to helping our customers with this transition. If you have any questions, please feel free to contact us, and we will be glad to give you more information and resources as they become available. As always, we know you have a choice where you do business, and we appreciate our customers choosing to do business with us!