New sales tax exemption registration for agricultural producers

By Blair Fannin

Contacts
Dr. Larry Falconer, 361-265-9203, l-falconer@tamu.edu


COLLEGE STATION – Farmers, ranchers and timber operators who produce agricultural and timber products for sale will need a special registration number to claim sales tax exemption on purchased taxable products used for their operations beginning Jan. 1.

The registration number was made a requirement by House Bill 268, which passed in the recent legislative session. The new registration process has implications for agricultural producers.

"While purchases of feed and seed are not subject to sales tax, it is important that agricultural producers obtain an identification number because many of the inputs required for production of crops and livestock are subject to sales tax,” said Dr. Larry Falconer, Texas AgriLife Extension Service economist in Corpus Christi. “Being ineligible for the sales tax exemption would cause a sizable increase in cost of production."

Producers can get a registration number through either a mail-in application or an online application that were initiated Oct. 3.

“Beginning Jan. 1, anyone who wants to claim the agriculture or timber sales tax exemptions for qualifying products will need a registration number to show retailers instead of simply signing an exemption certificate at the time of purchase,” Comptroller Susan Combs said in a statement. “The new registration process takes the burden off retailers to verify whether a purchaser is eligible for exemption. And it narrows the pool of purchasers claiming the sales tax exemption to those actually involved in production of agriculture and timber products for sale.”
For agricultural producers, the new legislation will affect many purchases of particular items used in production of commodities. The new legislation requires a registration number to claim tax exemptions when buying items such as machinery and equipment, fertilizers, insecticides, irrigation equipment, and off-road motor vehicles used for farming and timber production. Those entitled to make tax-free purchases of taxable qualifying products include groups such
as:
- farmers and ranchers who raise agricultural products to sell to others;
- fish farmers and beekeepers who sell the products they raise;
- custom harvesters;
- crop dusters;
- commercial nurseries engaged in fostering growth of plants for sale;
- timber producers, including contract lumberjacks.
The primary owner or operator of a farm, ranch or timber operation may receive one registration number that can be used by anyone authorized by the registrant – including family members or employees – to make tax exempt purchases of qualifying products for the business.
The application for a registration number should take less than 10 minutes to complete, according to the comptroller’s office. Online registration is available at GetReadyTexas.org, Online applicants will receive a registration number immediately.
A paper application may be downloaded from the website or call 800-252-5555 to receive a form by mail.