New law changes how Texas agriculture producers keep tax exempt status

NACOGDOCHES, TX (KTRE) - Farmers and ranchers have had a long-standing privilege to be exempt from sales tax on many farm related purchases. They simply register as a commercial producer with retailers. However, not all customers are honest. A new law changes how agriculture producers keep their tax exempt status, without jeopardizing retailers.

Feed store owner Sue Atkins always wants to please the customer. What she doesn't like to do is question their honesty.

"They like for us to give them an exemption on the state sales tax when we don't feel like it falls in that category. It makes it difficult for us," says Atkins.

At the same time Atkins doesn't want to get in any trouble with the state for under collecting sales taxes.

"They can close your business down," says Atkins.

Products, such as feeds and seeds are tax exempt anyway. Exemptions on the taxable, pricey items of fertilizers, equipment and machinery can amount to a lot of money.

"Like all programs, there were abuses of the sales tax exemption in agriculture for a long time," says George Wages, Farm Bureau Manager.

A budget strapped state began looking at the cost effectiveness of tax exemptions. That's when the agriculture industry got busy working toward reform.

"The burden of proof of agricultural exemptions is shifted back to the producer instead of leaving it in the merchant's hands to do," says Wages.

Beginning January 1st, a new law requires all commercial agricultural producers to register with the state controller's office, rather than the retailer, to obtain a universal sales tax exemption registration number.

"We'll have this number and won't be a judgement call for us. We'll be able to just put the number on the invoice and be through with complying," says Atkins.

Possibly, the true reason for tax exempt status will be restored. Lower production costs for agriculture producers and lower food costs for consumers.

The new law also applies to timber operations. The agriculture-timber exemption applications are available at

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