Texas Agriculture Sales & Use Tax Exemptions: What You Need to Know

If you’re involved in farming, ranching, or timber production in Texas, understanding the state’s sales and use tax exemptions is crucial. By taking advantage of these exemptions, you can save money on your agricultural-related purchases. Let’s explore the key details you need to know to qualify for these tax breaks.

Who Qualifies for the Agriculture Exemptions?

The Texas agricultural sales and use tax exemptions are available to anyone engaged in farming, ranching, or timber production. The eligibility depends on the items you purchase, as they must be used exclusively in the production of farm products. It’s not a question of who qualifies, but rather what items are eligible for these tax exemptions.

Applying for a Texas Agricultural and Timber Registration Number (Ag/Timber Number)

To access tax exemptions on agricultural items, you must first apply for an ag/timber registration number from the Texas Comptroller. This number is essential when making purchases, as it indicates your eligibility for the exemptions. To apply for the exemption certificate, you’ll need to provide details about your business, such as your address and primary products. Additionally, you’ll need to include your social security number or identification number and country of origin. If you are registered with the Texas Secretary of State (SOS), you’ll also need to provide your SOS file number.

To simplify the application process, it’s recommended to create an eSystems/Webfile account. This online registration system allows you to easily apply for an ag/timber number. The application takes approximately 10 minutes, and you’ll receive your ag/timber number at the end of the process. Alternatively, you can choose to fill out a paper application, but this method may take three to four weeks for processing.

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Without an ag/timber number, you’ll be required to pay tax to the retailer on your purchases.

Qualifying Agricultural Activities

A variety of agricultural activities qualify for the sales and use tax exemptions in Texas. These activities include ranching, farming, timber production, aquaculture, mariculture, fish farming, beekeeping, custom harvesting, crop dusting, commercial nursery operations, veterinary activities, and agricultural vocational training.

However, it’s important to note that not all agricultural-related activities are eligible for these exemptions. Activities such as home gardening, florist services, wildlife conservation, horse racing, wildlife hunting, and pet breeding do not qualify for the farming sales and use tax exemptions in Texas.

Automatically Exempt Items

Certain items used in agricultural production automatically qualify for state sales and use tax exemptions in Texas, even without an ag/timber number or exemption certificate. These items include work animals (such as horses and mules), seeds and plants used for animal and human consumption, feed for livestock and wild game (excluding pet food), and live animals for human consumption (such as cattle, sheep, hogs, and chickens).

For items that fall outside these categories, you’ll need a tax exemption certificate or an ag/timber number to purchase them without paying tax. These items must be exclusively used on a farm for agricultural production.

Take, for example, the need for grain handling equipment, rotary hoes, lubricants and oils for salt stands, farm machinery and bale transportation equipment, dryers, seed cleaners, and more. These items require a tax exemption certificate or an ag/timber number to be purchased duty-free.

It’s important to remember that certain items are not eligible for the Texas agricultural sales and use tax exemptions. Auto parts for vehicles licensed for highway use, construction materials, work clothing and shoes, safety apparel, motor vehicles, computers and computer software (unless used exclusively for agricultural production), pet food, furniture, housewares, dirt bikes, golf carts, dune buggies, remodeling services, security services, waste removal services, guns, ammunition, and traps are not covered by the exemptions.

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Agriculture Exemption Certificates

To claim a sales and use tax exemption on your farming purchases, you’ll need to present an agricultural/timber exemption certificate. This document must be filled out accurately and include your current ag/timber number and expiration date.

Motor Vehicle Exemption Certificates

Farm machines, including trailers, that function at least 80% of the time in the production of feed for animals or food for people qualify for tax exemptions. The same applies to trailers used by farmers for packing or marketing agricultural products.

It’s worth noting that the Texas agricultural tax exemptions extend beyond purchases alone. You can also enjoy tax exemptions when renting qualifying farm and timber machinery, including trailers.

By understanding the sales and use tax exemptions available to agricultural producers in Texas, you can maximize your savings and support the growth of your farming, ranching, or timber production business. For more information on taxes and agricultural-related topics, visit the Ames Farm Center.