Texas Taxes for Agriculture and Timber Industries
Ag/Timber Numbers and Exemption Certificates
Texas law requires a person claiming an exemption from sales tax on the purchase of certain items used in the production of agricultural and timber products for sale to obtain an Agricultural and Timber Exemption Registration Number (Ag/Timber Number) issued by the Comptroller of Public Accounts. The purchaser must include the Ag/Timber Number on an exemption certificate (PDF, 297KB) issued to a seller.
Purchasers claiming an exemption on qualifying items (PDF, 2.7MB) used in the production of food or other agricultural products for sale must issue a 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 a Texas Timber Operations Sales and Use Tax Exemption Certification (Form 01-925) (PDF, 270KB).
A purchaser should not use the generic Texas Sales and Use Tax Exemption Certificate (Form 01-339) (PDF, 41KB)to claim either the agricultural or timber exemptions on purchases made on or after Jan. 1, 2012.
A purchaser who has given his suppliers a blanket exemption certificate on the generic exemption certificate (PDF, 40KB) should replace those certificates with either the agricultural or timber exemption certificates for purchases made on or after Jan. 1, 2012.
Farmers and ranchers are not exempt entities, and not all purchases that farmers and ranchers make are exempt from sales tax. Some agricultural items, however, are exempt, while others are taxable unless purchased for exclusive use on a commercial farm or ranch in the production of food or other agricultural products for sale.
For sales tax purposes, a farm or ranch is land used wholly or in part in the production of crops, livestock and/or other agricultural products held for sale in the regular course of business.
Farms and ranches include commercial greenhouses, feed lots, dairy farms, poultry farms, commercial orchards and similar commercial agricultural operations.
Farms and ranches do not include home gardens, timber operations, kennels, land used for wildlife management or conservation, land used as a hunting or fishing lease, or similar types of operations that do not result in the production of agricultural products for sale in the normal course of business.
Certain items used exclusively in the production of timber for sale in the regular course of business qualify for exemption from Texas sales and use tax. Timber production includes activities to prepare the production site, and to plant, cultivate or harvest commercial timber that will be sold in the regular course of business. It also includes the construction, repair, and maintenance of private roads and lanes exclusively used for access to commercial timber sites.
Motor Vehicle Tax
Farm machines, trailers and semitrailers used primarily for farming and ranching, including machines and trailers used primarily in poultry operations and on feedlots, qualify for exemption from Texas motor vehicle tax.
Motor Fuels Tax
Texas imposes a tax of $.20 per gallon on motor fuel. The tax is imposed when motor fuel is removed from the terminal rack and included in the price paid at the pump.
A producer of agricultural or timber products can get refunds of tax paid on gasoline used in power take-off equipment or auxiliary power units, off-highway equipment, stationary engines and for other non-highway purposes.
All purchases of clear diesel fuel are taxable, including clear diesel used in power take-off equipment or auxiliary power units, off-highway equipment, stationary engines and for other non-highway applications.
Dyed diesel used exclusively to power non-highway agricultural equipment, such as a tractor or combine, on a farm or ranch can be purchased tax-free. A farm or ranch can be a feedlot, dairy farm, poultry farm, commercial orchard, commercial nursery or similar commercial agricultural operation. Unlike sales tax, agricultural use for purposes of the fuels tax exemption also includes dyed diesel used to power non-highway equipment used in a timber operation or for wildlife management as defined by the Property Tax Code, Section 23.51(7). But, a home garden does not qualify.
A farmer or rancher who holds a valid Texas Dyed Diesel Fuel Agricultural End User Signed Statement Number is allowed to buy up to 25,000 gallons of tax-free dyed diesel per month.
Producers of agricultural products can also apply for a Dyed Diesel Fuel Bonded User license which will allow them to purchase unlimited amounts of tax-free dyed diesel fuel for use in non-highway equipment.
Texas franchise tax applies to partnerships (general, limited and limited liability), corporations, LLCs, business trusts, professional associations, business associations, joint ventures and other legal entities.
Property taxes (also called ad valorem taxes) are locally assessed taxes levied by local taxing units. The state does not have local tax records on each property and its ownership and does not set property's value for property taxes. State law allows the Comptroller's office to advise local governments and taxpayers on property tax issues, but it cannot intervene in local tax matters.
The county appraisal district appraises property located in the county, while local taxing units set tax rates and collect property taxes based on those values. Land that qualifies for an agricultural appraisal has a lower taxable value for property tax purposes. Qualified agricultural lands are based on the land's capacity to produce agricultural products, including timber, rather than its market value.