Agricultural tax exemption change coming for new year
Post on: 2011-11-02 By: admin
On New Year's Day, a new law will take effect that requires farmers, ranchers and timber operators in Texas to have an agricultural sales tax exemption registration number to avoid paying sales tax on certain products used in their businesses.Texas House Bill 268 was passed in the legislative session earlier this year and requires farm, ranch and timber operators who produce agricultural and timber products for sale to have a special registration number to claim a sales tax exemption on taxable products used in those businesses, Texas Comptroller Susan Combs said.
The new legislation requires a registration number to claim tax exemptions when buying items such as machinery and equipment, fertilizers, insecticides, irrigation equipment and off-road motor vehicles used for farming and timber production. Those entitled to make tax-free purchases of taxable qualifying products include farmers and ranchers who raise agricultural products to sell to others, fish farmers and beekeepers who sell the products they raise, custom harvesters, crop dusters, commercial nurseries engaged in fostering growth of plants for sale and timber producers, including contract lumberjacks.
Combs said products such as feed for livestock and wildlife, seeds and annual plants always are tax exempt and would not require a registration number.
"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," said Joe Parker Jr., Clay County rancher and president of Fort Worth-based Texas and Southwestern Cattle Raisers Association.
Texas was facing a large budget shortfall leading into the last legislative session. There were many things on the table to help close the gap, one of which included eliminating and streamlining various sales tax exemptions, Parker said.
"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," Parker said. "While the agricultural sales tax exemptions weren'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," Parker said.
The primary owner or operator of a farm, ranch or timber operation may obtain one registration number that can be used by anyone authorized by the registrant — including family members or employees — to make tax-exempt purchases of qualifying products for the business, Combs said.
The application for a registration number should take less than 10 minutes to complete. Online registration started Oct. 3 at GetReadyTexas.org.
The exemption number is free and is good for four years.
© 2011 Abilene Reporter-News. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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