Sales-tax exemption rules could change for Texas farmers/ranchers
By Gene Hall
For many years, Texas farmers and ranchers have received an exemption of the state sales tax on those items used to produce agricultural products. This is a very reasonable and appropriate state policy. In lean years, it can be the difference between staying in business or not. Despite the law’s popularity, there have been problems and those who believe they’ve been victimized by its administration are becoming increasingly vocal.
Currently, anyone who buys products for use in agricultural production only has to state that he or she is sales-tax exempt and fill out a form. When, however, that form arrives in the Texas Comptroller’s office and there is a problem, the seller of that product may be liable for the tax. Quite understandably, those that sell these kinds of products are objecting to that.
I have been told of situations where abuse has occurred. For example, a 4-wheeler, ostensibly for use in farm chores, was sold and the sales tax exempted. Later, when the justification was found lacking, the dealer had to pony up the sales tax. This is a substantial hit for any business, small or large.
There are all kinds of good reasons to continue this exemption for the benefit of those who farm and ranch and none for those who do not. House Bill (HB) 268 has been filed in the Texas Legislature to address this problem. The bill requires farmers and ranchers to secure a number that will prove their exempt status. It also would put some teeth into enforcement, with penalties for falsely claiming exempt status. The trick is to make the process seamless and easy for those who deserve it.
Texas Comptroller Susan Combs has provided a list of reasonable documentation her office will accept as proof of farm or ranch production. These include receipts for sales of livestock or crops, expense receipts for feed or other production items, a Farm Services Agency farm number, or a Natural Resources Conservation Service cooperator number.
Of course, an IRS Schedule F, reporting farm income, would do the trick, but there is understandable reluctance to provide personal income tax information to a state agency.
The voices complaining against fraudulent use of sales-tax exemptions are growing louder. At some point, these voices could threaten the continuation of the agricultural sales-tax exemption that is very important to Texas agriculture.
HB 268 seems very reasonable. It could be an idea whose time has come.
Gene Hall is the public relations director for the Texas Farm Bureau.