Do farmers need a 'number' for sales tax exemption?

By LORI COPE | East Texas Edition

April 8, 2004 -- Maybe one of the biggest misconceptions about sales tax exemption for agriculture is there is a "number" that the farmer or rancher needs to present to the vendor at the time of purchase.

But according to the Texas State Comptroller's office, the only thing a farmer or rancher needs to present to the vendor is a "Texas Sales and Use Tax Exemption Certificate," a form that can be downloaded from the state agency's website, or received by mail with one toll-free phone call.

The topic of this story was generated by a Country World subscriber who was buying a backhoe tractor from a sales/rental dealership. Being a farmer, the subscriber was not required to pay sales tax on the piece of equipment, but the seller needed verification of sales tax exemption.

Okay, where does a person get such verification? A call to the county clerk's office and county tax appraiser's office did not supply the farmer with the information he needed. A call to Country World put us on to the challenge.

The Texas Comptroller of Public Accounts is the correct source for the needed information. From their website's homepage, www.window.state.tx.us, a couple of clicks will get the sales tax exemption certificate. This certificate, which opens in the program Adobe Acrobat Reader, can be printed, filled out, and then presented to the vendor. The certificate has a note at the bottom which reads: "This certificate does not require a number to be valid. Sales and Use Tax 'exemption numbers' or 'tax exemption' numbers do not exist."

The form is one page, and is simple to fill out. The name of purchaser, address, and phone number is requested; then the seller's name and address; and description of the item(s) purchased (or an invoice can be attached). Also the purchaser has to state the "reason" for the exemption, such as farm use. The completed certificate form is then given to the seller/vendor/supplier, and the deal is done. The purchaser does not have to pay sales tax.

Also on the comptroller's website is a helpful, detailed publication that explains "Tax Exemptions for Agriculture." It's easy to read and understand, and when printed, is four, letter-size pages. The publication begins by noting "although farmers and ranchers are not automatically exempt from paying sales tax, they may claim exemption from sales tax for certain items used in agricultural production." The publication lists items that are "always exempt," items that are "exempt if used exclusively for agricultural production," and items that are "not exempt," such as general purpose buildings such as barns, and machinery and equipment that are used only part of the time in agricultural production. The informational pages also contain definitions for machinery and equipment, details about motor fuels tax, and more.

If an ag producer wanted the legislative statutes, in legislative lingo, of the tax exemptions for agriculture, the "statutes" page on the comptroller's website can be visited. The statutes are 151.316 in the listing. The tax exemptions for agriculture "rules," which are the comptroller's office interpretation of the legislative statutes, can be found under the rules heading, 3.296 in the listing.

Ag producers who do not have access to the Internet can call 800-252-5555 to receive a copy of the exemption certificate, and copy of the tax exemptions for agriculture publication.

Other information supplied by the comptroller's office is there is a four-year statute of limitations. If an ag producer paid sales tax on an item, and could have been exempt from the sales tax, the producer can fill out the tax exemption certificate and present it to the vendor. If the vendor does not wany to refund the sales tax to the producer, then the producer can contact the state comptroller's office.

It is also pointed out that agricultural sales tax exemptions for timber are different. But, due to changes in legislation, the exemptions for timber producers (detailed on the statutes webpage, No. 3162) will be similar to today's ag sales tax exemptions by 2008.