2011-08-18 / Front Page

Farm and Ranch Exemption Rules Change

House Bill 268, which passed in May of this year and goes into effect September 1, states that the exemption on state sales tax farmers and ranchers have enjoyed for many years will now require that they 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.

Although the law goes into effect September 1, it appears that there will be a “grace period” that will allow the exempt status to remain as is until January 1, 2012. At this point, we are waiting for a formal notice from the State Comptroller’s Office referencing procedures for securing this exempt status.

State Representative Tim Kleinschmidt said, “This bill moved smoothly through the legislative process and did not appear to have any serious opposition from agricultural organizations, like the Farm Bureau or the Texas Cattlemen’s Association. Expectations are this will bring in close to $1.5 million in additional sales tax on the state level and stop abuses. This doesn’t include the benefits other governmental entities, like municipalities, will gain from additional sales tax dollars.”

Gene Hall, Public Relations Director with the Texas Farm Bureau, said earlier this year, “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.”

“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.”

“HB 268 [has addressed] this problem. 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.”

“ HB 268 seems very reasonable. It could be an idea whose time has come.”

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