"Agricultural use" means use of diesel fuel to power non-highway agricultural equipment, such as a tractor or combine, on a farm or ranch. A farm-plated motor vehicle is not agricultural equipment.
The farm or ranch can be a feedlot, dairy farm, poultry farm, commercial orchard, commercial nursery, timber operation or similar commercial agricultural operation. A home garden does not qualify. Agricultural use includes use of fuel for wildlife management as defined by Property Tax Code Section 23.51(7), but does not include the processing, packaging or marketing of agricultural products by anyone other than the original producer.
Yes, specific permits and user numbers are needed based on how you will use the fuel:
If an agricultural producer needs to exceed the signed statement limit, the producer must apply for a dyed diesel fuel bonded user license (use Form AP-133, Texas Application for Fuels Tax License (PDF)) to purchase unlimited amounts of tax-free dyed diesel fuel for use in non-highway equipment. Under the law, the Comptroller's office may require a minimum bond of $10,000.
License holders must file a quarterly or yearly report (register for Electronic Data Interchange or use Form 06-169, Texas Dyed Diesel Bonded User Fuels Tax Report (PDF)) that includes dyed diesel fuel inventories, purchases and uses.
Dyed diesel fuel cannot be legally put into the fuel tanks of motor vehicles operating on Texas public highways.
No, but a farmer or rancher can request a refund 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 refund claims must be supported by appropriate records and documentation, which have to be kept available for inspection for four years. Taxpayers who use a distribution log to record removals from bulk storage should note deliveries for off-highway purposes with a description of the equipment. Each entry should show the date and number of gallons, and must be signed. The log must include the taxpayer's stamped or preprinted name and address.
A refund claim must be postmarked within one year from the first day of the month following the date of use (if withdrawn from storage) or purchase, whichever is later. For example, if the gasoline was purchased or used on Jan. 18, 2016, the claim must be filed by Feb. 1, 2017.
Taxpayers can request a refund using Form 06-106, Texas Claim for Refund of Gasoline or Diesel Fuel Taxes (PDF). Do not include original invoices or other supporting documentation. The Comptroller's office will request additional documentation if needed.
Farmers and ranchers claiming agricultural exemptions must register with the Comptroller to obtain ag/timber numbers. Farmers and ranchers must issue an agricultural exemption certificate with an ag/timber number to sellers in lieu of paying tax on qualifying items used exclusively on a farm or ranch in the production of agricultural products for sale.
To receive an ag/timber number immediately, first register to create a secure online profile through eSystems. Once registered, you can directly access the application. To receive an application by fax, call 1-800-531-1441.
Anyone producing agricultural or timber products for sale in the regular course of business can complete an application for ag/timber number, including:
A person who does not produce agricultural or timber products for sale is not eligible for an ag/timber number. Activities that are not eligible include:
Yes, anyone producing agricultural or timber products for sale in the regular course of business can claim the agricultural or timber exemption, respectively, on qualifying items (PDF) purchased in Texas.
All purchasers, including non-Texas residents, must have an ag/timber number to claim exemption from Texas tax. Purchasers who do not have an ag/timber number must pay tax to suppliers at the time of purchase and cannot request a refund directly from the supplier. Instead, the purchaser should submit a refund claim directly to the Comptroller's office after obtaining the ag/timber number.
Yes. All ag/timber numbers are subject to renewal in four-year intervals, regardless of when the number was initially issued. For example, an ag/timber number issued any time in 2011, 2012, 2013 or 2014 expired in December 2015 if it wasn't renewed. New and renewed ag/timber numbers are good until December 2019, and registrants will be required to renew their numbers at that time.
If your ag/timber number is expired, you can reapply.
For sales and use tax purposes, a farm or ranch is defined as "one or more tracts of land used, in whole or in part, in the production of crops, livestock or other agricultural products held for sale in the regular course of business" (see Texas Tax Code 151.316(c)(1)). This definition includes feed lots, dairy farms, poultry farms, commercial orchards, commercial nurseries and similar commercial agricultural operations.
The term "farm or ranch" does not include home or community gardens, kennels, zoos, parks, horse racing stables, horse boarding and training facilities, timber operations, or similar operations that are not producing agricultural products for sale. Open or undeveloped areas, land used for hunting or fishing leases, and wildlife preserves are not farms or ranches for sales tax purposes, even if the land has received an agricultural appraisal for property tax purposes.
Timber operations are not farms or ranches, but they qualify for exemption under Tax Code Section 151.3162 when purchasing qualifying items used exclusively in producing timber for sale. See Rule 3.367 for more information.
No. Furniture and housewares do not qualify as farm machinery or equipment used exclusively in producing agricultural products for sale even if they are used in a farm or ranch office.
Generally, building materials or structural components used to construct or repair barns used for storage or equipment repair and other general purpose buildings are taxable. However, commercial dairy farmers can claim an exemption from tax on the purchase of building materials and other tangible personal property that will be incorporated into or attached to a free-stall dairy barn, or a dairy structure located on a commercial dairy farm used solely for maternity purposes and used or employed exclusively for the production of milk.
Buildings specifically designed for agricultural production and that cannot be economically used for any other purpose are tax exempt. Examples are automated laying houses, farrowing houses and commercial greenhouses.
Commercial nurseries that grow plants from seeds or cuttings or otherwise foster the plants' growth prior to sale can issue an agricultural exemption certificate with an ag/timber number to make tax-free purchases of:
Feed such as oats, corn, chicken scratch and hay for farm and ranch animals is always exempt. Neither an exemption certificate nor an ag/timber number is required to purchase these items tax-free.
Pet food is taxable. (Pets normally include dogs, cats, rabbits, hamsters, mice, snakes, exotic birds and tropical fish.)
Feed and supplies used or consumed to board and care for dogs or other animals used for sport, show and as pets are taxable.
Food for animals can be purchased tax-free by issuing an agricultural exemption certificate with an ag/timber number in these specific situations:
No. Sales tax is not due on hay, corn, oats or any other type of feed wildlife normally consume. Examples include deer corn, wild bird seed and perishable bait used for commercial, sport and recreational fishing. Note that bird and wildlife feeders are taxable.
No. Wildlife feeders and hunting blinds are always taxable, whether you are the owner of the land or if you are leasing the property.
Machinery and equipment exclusively used or employed on a farm or ranch in the building or maintaining of roads or water facilities or in producing food for human consumption, grass, feed for animal life or other agricultural products to be sold in the regular course of business qualifies for exemption.
A separately stated charge for labor to construct a new pasture road is not subject to tax. Any processed materials (such as asphalt, crushed or mixed aggregate) incorporated into the roads are taxable. Unprocessed soil, gravel or caliche is not taxable. The type of contract the contractor has with the farmer or rancher determines the tax responsibilities for any processed materials used in the new construction of pasture roads follows:
The total charge for both processed materials and labor to repair a pasture road is taxable regardless of whether a lump-sum or separated contract is used. The farmer or rancher may not issue an exemption certificate in lieu of paying tax for the repair of farm or ranch roads. The agricultural exemption does not apply to improvements to realty or taxable services. A pasture or ranch road is a nonresidential improvement to realty.
Repairing or grading a farm or ranch road is a taxable, nonresidential repair or remodeling service. Farm and ranch roads are those that are located on private property that run from a public roadway to any portions of a farm or ranch where production of agricultural products occurs, but do not include driveways to residences that branch off of a road. Tax is due on the entire amount charged to repair or remodel a nonresidential road.
Roads that run directly from a public roadway to residential dwellings and driveways are considered residential improvements to real property. Labor to repair or remodel a residential road or driveway is not taxable. A contractor repairing an existing residential road under a lump-sum contract must pay or accrue tax on all taxable materials used to construct the road and should not collect tax from the farmer/rancher. When such roadwork is performed under a separated contract, the contractor should collect tax only on the separately stated charge for taxable materials – labor charges on this type of job are not taxable.
When a road runs to a residential dwelling and then extends past the home to agricultural production areas, the section of the road from the public roadway to the residence is considered residential, while the remaining portion of the road is nonresidential. A charge for repairing or remodeling a road that is partially residential and partially nonresidential is presumed taxable if the work done on the nonresidential portion of the road represents more than 5 percent of the total.
When a seller sells taxable items and items that can qualify for the agricultural exemption, the seller can obtain a single "blanket" agricultural exemption certificate from the farmer or rancher when the first purchase is made. The seller should keep that exemption certificate on file to verify subsequent exempt agricultural purchases the farmer/rancher makes. When subsequent exempt purchases are made, the retailer can simply stamp, write or print a statement on the invoice that says the items purchased on the invoice will be used for "Exempt agricultural purposes." The stamped invoice must also include the customer's ag/timber number and signature.
If a customer with a blanket agricultural exemption certificate on file with the retailer orders qualifying items by phone, online or by mail, the invoice for the transaction must show the purchaser's ag/timber number and the retailer must make a note on the invoice showing how the order was received (i.e., via the phone, online or by mail).
Seeds and annual plants are exempt when their products ordinarily constitute food for human consumption, are used to produce feed for exempt animals, or are to be sold in the regular course of business.
Perennial plants, including trees, are subject to sales tax. A commercial orchard, however, can claim a tax exemption when buying trees that will be used to raise fruit and/or nuts for sale in the regular course of business by issuing an agricultural exemption certificate with an ag/timber number.
The products of perennial plants that constitute food for human consumption (such as vegetables, fruits, nuts and herbs) are not subject to tax.
Yes, tax is due on work clothing. Clothing does not qualify for the agriculture exemption.
Under Tax Code Section 151.316(a)(11), machinery and equipment used exclusively in an agricultural aircraft operation, as defined in 14 CFR Section 137.3, qualifies for exemption. This exempts aircraft licensed by the Federal Aviation Administration for the aerial application of fertilizers and other chemicals used exclusively on farms and ranches in the production of agricultural products sold in the regular course of business. The exemption includes:
The exemption does not apply to items such as office furniture and supplies.
Texas Tax Code Section 151.328 also provides an exemption for aircraft sold for an agricultural use as defined by Tax Code Section 23.51, relating to appraisal methods and procedures for property tax. The exemption applies only to aircraft used for:
The exemption applies only to aircraft, and repair and replacement parts and labor for qualifying aircraft. The exemption does not apply to other machinery or equipment used on or with the aircraft, or that the aircraft owner or operator uses.
To qualify for this exemption, at least 95 percent of the aircraft's use must be in connection with the listed qualifying uses. Flight travel of fewer than 30 miles each way to a location to perform a service described above does not disqualify an aircraft from the exemption. Persons who claim an exemption must maintain and make available to the Comptroller flight records for all uses of the aircraft.
Fences, cattle guards, gates and chutes used to contain livestock or to enclose fields and pastures on a farm or ranch qualify as exempt machinery and equipment. An agricultural exemption certificate with an ag/timber number is required.
The same materials are taxable when purchased for use on land that does not qualify as a farm or ranch, or when used on a farm or ranch to enclose a residential yard. For example, persons owning or operating game management or wildlife preserves cannot purchase fencing materials tax free, because they are not producing agricultural products for sale in the regular course of business.
Labor to install fence posts, gates and cattle guards qualifying as new construction of an improvement to realty is not taxable whether billed in a lump sum or separately stated from the charge for materials. The labor to repair or remodel an existing fence, gate, cattle guard or road constitutes taxable real property repair and remodeling. See Rule 3.357 and Tax Code Section 151.0047. To be exempted, fence posts, gates and cattle guards must be separately stated from installation labor on repair or remodeling jobs performed on a farm or ranch.
Fence posts, cattle guards, gates and chutes installed under a lump-sum contract with the farmer do not qualify for the agricultural exemptions, because the contractor is considered the consumer of the items. See Tax Code Section 151.056.
No. There is no exemption for these items.
Yes. Students and teachers participating in FFA, 4-H or a vocational agriculture course of study can claim an exemption from tax on items used exclusively on a farm or ranch (including a school "farm") to raise livestock, poultry and rabbits that will be shown and sold.
Because titling and registration requirements for farm trailers vary, contact your county tax office for information about required documents and fees.
Yes. Farm machines, trailers and semi-trailers used primarily (at least 80 percent of the operating time) for farming and ranching, including the raising of poultry and use in feedlots, are exempt from motor vehicle tax.
For tax purposes, the qualifying characteristics follow:
For more information regarding farm trailers and machines, see the publication Motor Vehicle Tax Guide.
Yes. A standard pickup truck is not exempt from motor vehicle tax as a farm vehicle even if it displays farm plates. Motor vehicles operated on a farm or ranch, other than qualified agricultural motor vehicles (farm machines, trailers and semi-trailers), are subject to motor vehicle tax.
For more information regarding farm trailers and machines, see the publication Motor Vehicle Tax Guide.
No. If a motor vehicle is licensed with farm plates for road use, sales and use tax is due on the purchase of repair or replacement parts, including tires.
There is, however, an exemption for tangible personal property, including tires, sold or used to be installed as component parts of a motor vehicle, machinery, or other equipment exclusively used or employed on a farm or ranch in the building or maintaining of roads or water facilities or to produce:
Motor vehicles licensed for on-road use with farm plates do not qualify for this exemption, because these motor vehicles are not exclusively used on a farm or ranch as required by law. Farm-plated vehicles lose the ag/timber sales tax exemption because they may also be legally used to attend church or school, to visit a doctor for medical treatment or supplies, or for other home or family needs.
Yes. Farmers, ranchers and timber operators must register with the Comptroller and obtain an ag/timber number to purchase a motor vehicle tax free and claim agricultural or timber exemptions. The ag/timber number is also required to make tax-free purchases of otherwise taxable machinery or equipment if it will be exclusively used on a farm, ranch or timber operation to produce agricultural or timber items for sale in the normal course of business.
The ag/timber number must be indicated on Form 130-U, Application for Texas Title (PDF), to make a tax-free purchase of a qualifying motor vehicle. This includes vehicles purchased to be leased to qualifying farmers, ranchers and timber operators.
Some farm machines, such as tractors, are not motor vehicles for tax purposes and do not normally require titling and registration as such. Instead, tractors are tangible personal property subject to sales and use tax unless the purchaser claims the ag/timber exemption. To qualify for the sales and use tax exemption, tractors must be exclusively used on a farm or ranch to produce agricultural products for sale in the normal course of business. To purchase a farm tractor or similar machinery subject to sales and use tax, the purchaser will give an agriculture exemption certificate containing the ag/timber number.
No. A horse trailer with sleeping quarters is not exempt, nor is any trailer used for transporting horses to and from competitions or shows.
Only persons producing agricultural products or timber for sale can apply for an ag/timber number and then use it to make a qualifying purchase tax free. Therefore, if the farm is a business entity (i.e., a separate "person" under the law, such as a corporation) and is engaged in this business, then only the farm can use its number to purchase a farm trailer tax free. Only persons engaged in a qualifying agricultural business can legally obtain an ag/timber number. An officer of a corporation engaged in such a business, for example, is not qualified to personally claim an ag/timber exemption.
Yes. After registering for the ag/timber number, you can file Form 14-202, Texas Claim for Refund of Motor Vehicle Tax (PDF).
No. Merely owning a horse does not qualify a person for an ag/timber number because horse ownership is not producing agricultural products for sale in the regular course of business. The horses themselves and horse feed (including grain, hay and feed supplements) can be purchased tax free without an ag/timber number or an exemption certificate.
Yes. Persons who breed and sell horses in the regular course of business (including standing studs or using live cover, shipped semen or artificial insemination) qualify for an ag/timber number. Equipment used exclusively on the farm or ranch to produce horses for sale can be purchased tax free.
You may buy certain items tax free for use exclusively on your farm or ranch in the production of horses for sale, including:
The exemption does not apply to items such as barns, office furniture, clothing and computers. Read our publication, Texas Tax Exemptions for Agriculture (PDF), for more information.
Yes. Breeders qualify as commercial producers and can get ag/timber numbers to purchase equipment tax free when used exclusively on their farm or ranch in the production of horses for sale. Tax must be paid, however, on the purchase of items such as saddles, tack and equipment that is taken off the ranch for shows or trail rides.
No. To qualify, persons must produce horses for sale in the regular course of business. The horses themselves and horse feed (including grain, hay and feed supplements) can be purchased tax free without an ag/timber number or an exemption certificate.
No. To qualify, persons must produce horses for sale in the regular course of business.
Yes, because this is considered producing and selling horses in the ordinary course of business. The Comptroller interprets the purchase and training of horses as qualifying production because the training fosters the growth of the horses. Equipment purchased tax free, however, must be used exclusively on a trainer's farm or ranch in the production of horses that are resold.
Yes. Commercial cattle ranchers can claim an exemption on equipment used on their ranch in the production of cattle, including items used for their work horses. The exemption applies to items such as ropes, lariats, hotshots, whips, canes, horse tack items, horseshoes, nails, halters and bridles, as long as they are used exclusively on the ranch with the work horses.
These items do not qualify for exemption if they are used in any other manner. For example, a bridle purchased for a horse used to work cattle is exempt, while a bridle for a rodeo, show or race horse is taxable.
No. Tax is due on equipment used to care for boarded horses as well as those used for lessons and trail rides. Horse boarding and riding lessons are nontaxable services, while trail rides are taxable as an amusement service. None of those activities qualify as the production of agricultural products for sale. Providers of nontaxable services and taxable amusement services owe tax on all taxable items used to provide their service. The horses themselves and horse feed (including grain, hay and feed supplements) are not taxable.
No. To be eligible for an ag/timber number, you must produce agricultural products for sale in the ordinary course of business.
Yes. Because your contract requires you to provide grass for the cattle, you can obtain an ag/timber number and use it to purchase tax-free those items used exclusively to produce the grass.
Your tenant can use his ag/timber number to buy the fencing materials tax free for the land used to produce agricultural products for sale. Your reimbursement agreement does not disqualify your tenant from appropriately using the ag/timber number to claim an exemption on qualifying items used in the commercial production of agricultural products.
Yes, you can use your tenant's ag/timber number to claim an exemption on the fencing materials and other qualifying items used on the land to produce the agricultural products that will be sold, if your tenant authorizes you to do so. The tenant is still responsible for ensuring the number is used properly in accordance with the law. Ag/timber number holders can authorize others who are associated with the commercial agricultural or timber operation (i.e., family members, employees) to use their number to make qualifying purchases on their behalf; however, the number holder should not allow anyone to use the number for personal or non-qualifying purchases. Misuse of an ag/timber number may result in criminal and civil penalties for the number holder, as well as revocation of the number.
Yes, since your ordinary course of business is the production of agricultural products for sale, you are eligible for an ag/timber number. You can use the number to claim an exemption on items that will be used exclusively to maintain or prepare the land for commercial agricultural production.