If you want agricultural exemptions from most sales and fuel taxes in Texas, you'll need to file a specific form. For property taxes, you'll need to file several forms to reap the financial benefits.
In Texas, agricultural land is “one or more parcels used, in whole or in part, in the production of crops, livestock or other agricultural products held for sale in the regular course of business.” This definition includes not only crop farms and cattle ranches, but feed lots, dairy and poultry farms, orchards, and nurseries.
For this to apply, the business has to be about growing things. Fish farms are okay; fishing and hunting businesses are not. Commercial greenhouses for growing plants from seeds are okay; florists' houseplant and cut-flower holding facilities are not. Pet and horse breeding don't qualify, nor do home gardens.
You don't pay sales taxes on farm animals, farm-animal feed and crop seeds and annual plants. Just print and fill out a blanket exemption certificate to give the seller.
For other purchases, you'll need a Texas-issued Agricultural Exemption number, renewable every four years, and an exemption certificate. The list of sales-exempt items runs from air tanks to vegetable waxers.
Clothes -- including "safety apparel" -- as well as furniture, guns, building materials and taxable services are not tax-exempt. Neither is dog food, unless it's for working dogs trained for specific farm or ranch work, such as herding dogs.
Vehicles and Fuel
You can forget exemptions for dirt bikes and golf carts: They don't qualify for tax breaks. Only vehicles and trailers used more or less exclusively on the farm can be exempted from sales and vehicle taxes. An airplane used exclusively for agriculture is exempt. Your sales tax exemption is only good if you apply for the exemption when you buy the vehicle.
If you buy retail gasoline and dyed diesel fuel at the pump, and that fuel is used on a farm or ranch, you can get a refund on the state's 20-cent-a-gallon state fuel tax. Clear diesel fuel is always taxed.
However, you can get 10,000 gallons per month of tax free dyed diesel fuel if the fuel is not all for farm use. For non-highway use you can get up to 25,000 gallons. Either way, you'll need a Texas Dyed Diesel Fuel Agricultural End User Signed Statement Number. You give the supplier a copy of the statement of exemption when you buy fuel.
The Signed Statement Number is not the same as a Dyed Diesel Fuel Bonded User license, which allows you to buy unlimited tax-free dyed diesel for non-highway use.
You can apply for property-tax exemptions under two different sections of the Texas tax code: agricultural use or "open-space land." They're covered in tax code sections 23.41 - 23.47 and 23.51 - 23.59, respectively.
Your county appraiser determines whether your farm or ranch qualifies for either. The appraiser's instructions for open-space land appear here. After that, the county appraiser sets the taxable value of land, and county and municipal governments set the tax rate.
You reapply annually for an agricultural appraisal. If you qualify, your land is appraised not on its sales market value, but on its capacity to produce agricultural products. That is, you pay more for a thriving acre of cotton than for an acre of desert that can barely feed a goat. Read more on the Texas A&M real-estate center web page here.
- (1)Texas Comptroller of Public Accounts: Agriculture and Timber Industries FAQ #6, #28, #1, #16
- (2)Texas Comptroller: Texas Taxes for Agriculture and Timber Industries -- Ag/Timber Number
- (8)Texas Comptroller: Texas Application for Fuels Tax License -- Dyed Diesel Fuel Bonded User, end of p. 3
- (9)Texas Comptroller: Agricultural and Timber Industry FAQs -- Agriculture and Fuels Tax -- #1