Texas Ag & Timber Exemptions
Farm Buildings are NOT “Ag Exempt” in Texas. Not our rules, not our decision. Virtually every other state DOES exempt Ag buildings from sales tax, but not the Texas Comptrollers office! Here's the details directly from the Texas Comptroller's Office. Please contact your local Texas congressman or woman if you think this is WRONG like we do!
BUILDINGS AND STRUCTURES
Most buildings and structures used on a farm or ranch, and the materials used to construct them, are taxable. General purpose and storage buildings such as hay barns, machine shops, bunkhouses, kennels, offices and livestock barns are not exempt. A building or structure that is designed for a specific agricultural purpose and constructed in such a way that the building cannot be economically used for any other purpose without major structural changes is considered, for tax purposes, to be exempt as machinery or equipment. The structure and the materials used to construct it qualify for exemption subject to the conditions set out below. Examples of qualifying structures include an automated laying house, cattle guard, and commercial greenhouse.
STRUCTURES USED FOR POULTRY CARCASS DISPOSAL
Commercial poultry operations can claim an exemption on the purchase of tangible personal property that will be incorporated into a structure that is used exclusively for the disposal of poultry carcasses in accordance with Water Code Section 26.303.
CERTAIN COMMERCIAL DAIRY FARM BUILDINGS – NEW IN 2011
Effective Sept. 1, 2011, commercial dairy farmers can claim an exemption from tax on the purchase of building materials and other tangible personal property that, after purchase, will be incorporated into or attached to a free-stall dairy barn or a dairy structure used solely for maternity purposes that is located on a commercial dairy farm and is used or employed exclusively for the production of milk.
CONSTRUCTION OF QUALIFYING BUILDINGS AND STRUCTURES
When constructing or repairing a building or structure that qualifies for exemption as agricultural equipment, the farmer or rancher must purchase the qualifying materials by issuing a properly completed exemption certificate to the seller of the materials. The seller of the materials may be the retailer selling directly to the farmer or rancher or the seller may be a contractor hired by the farmer to provide the labor and materials to construct the building under the terms of a separated contract.
The agricultural exemption cannot be claimed by a contractor purchasing materials to construct a qualifying structure under a lump-sum contract entered into with the farmer or rancher. Under Texas law, a contractor operating under a lump sum contract is considered the consumer, not the seller, of all tangible personal property incorporated into the realty of the customer. If the contract is lump sum, the contractor owes tax on the construction materials at the time of purchase and may not claim exemptions that could be available under other circumstances. The farmer or rancher may not issue and the contractor may not accept exemption certificates, such as the new agricultural exemption certificate or a direct pay exemption certificate, for these real property improvements.
See Rule 3.291, “Contractors” for more information concerning sales tax responsibilities associated with lump sum and separated contracts for new construction. Contractors constructing an improvement to realty under a separated contract are considered sellers of the incorporated materials and may issue a resale certificate to suppliers when purchasing construction materials that will be incorporated into a customer’s exempt property, as well as qualifying farm machinery or equipment that the contractor will install on a farm or ranch. The contractor must obtain a valid exemption certificate in lieu of collecting the tax on the separately stated charge for qualifying agricultural equipment. The labor for new construction is not taxable.