Ag producers encouraged to apply for ag sales-tax exemption
By Joe Parker Jr.
Beginning Sunday, Jan. 1, 2012, a new law will require all commercial agricultural producers to have an agricultural sales-tax exemption registration number to be exempt from agricultural sales tax in Texas. The exemption number is free and good for four years.
The agricultural sales-tax exemption is important to producers and consumers alike. By exempting commercial agricultural producers from the agricultural sales tax, the cost of food is kept down for consumers. This has been the case for many years.
So why are eligible producers required to get an exemption number now?
Leading into the last legislative session, Texas was facing a large budget shortfall. There were lots of things on the table to help make up the gap, one of which included eliminating and streamlining many sales-tax exemptions. Since sales tax is the primary source of revenue for the state, the legislature was looking closely at all tax exemptions, and will continue to do so as they head into the 2013 session.
While the agricultural sales-tax exemption wasn’t in danger of being eliminated, the process did highlight some abuses. Unfortunately, many ineligible producers have falsely claimed an agricultural sales-tax exemption. What’s more, retailers have had no effective way of ensuring that eligible products sold were actually used for agricultural purposes, so when they’ve been audited by the state, the retailer has ultimately been responsible for shouldering all of the burden rather than sharing the responsibility with the buyer.
One of the greatest attributes of the agriculture industry is its reputation as an honest industry where a person’s handshake is as good as a signed contract. Because we recognized that abuse was taking place with the agricultural sales-tax exemption, ag industry associations and organizations, including the Texas and Southwestern Cattle Raisers Association, took a proactive approach to address this issue.
Working with the state Legislature, the ag industry and several business associations developed and supported House Bill (HB) 268, introduced by Rep. Harvey Hilderbran of Kerrville and Sen. Kel Seliger of Amarillo. The ag industry felt that HB 268 was necessary to curb abuse and demonstrate to the Legislature and the Comptroller’s office that we were willing to address the problem ourselves -- rather than have a solution dictated to us by the state government.
It is our hope that this proactive approach will ensure the agricultural sales-tax exemption stays in place for generations of Texas farmers and ranchers.
Here are some basic points about HB 268:
•The bill requires that starting Jan. 1, 2012, those wishing to get an agricultural sales-tax exemption have an exemption registration number from the Comptroller’s office.
•This exemption number is free and is good for four years.
•If someone wishing to claim an agricultural sales tax exemption does not have an exemption number, they will be required to pay the sales tax, but can apply for a refund, like current law, to the Comptroller’s office.
•One number can be used per agricultural operation. HB 268 allows multiple people associated with that operation to use the same number.
•Retailers will have access to an online database to look up numbers if an individual cannot remember his or her number.
•HB 268 does not remove any agricultural items or production qualifications that qualify for the agricultural sales-tax exemption.
•HB 268 protects confidential information such as Social Security numbers from being shared with the Comptroller’s office.
Several other states, including Oklahoma, have implemented a system similar to this, and it has worked well.
Producers can register for the Texas Agricultural and Timber Exemption Number online at cpa.state.tx.us. or download the registration form from that page and mail the completed form to the Comptroller’s office.
As we all know, there is no perfect system to protect against all abuses. However, the cattle raisers association felt this was a fair and economical approach to address the abuse associated with this exemption. It was also a pro-active, good-faith effort by those involved in commercial agricultural production and those in the retail business to cooperatively address this problem.
Joe Parker Jr. is a third-generation rancher from Clay County, Texas. He is president of the Texas and Southwestern Cattle Raisers Association.