82R16416 ALL-F

By: Hilderbran H.B. No. 268

A BILL TO BE ENTITLED

AN ACT

relating to the exemption from sales and use taxes, including the motor vehicle sales and use tax, for timber and certain items used on a farm, ranch, or timber operation.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:

SECTION 1. Subchapter E, Chapter 151, Tax Code, is amended by adding Section 151.1551 to read as follows:

Sec. 151.1551. EXEMPTION NUMBER REQUIRED FOR TIMBER ITEMS AND CERTAIN AGRICULTURAL PROPERTY. (a) To qualify for an exemption for an item under Section 151.316(a)(3), (6), (7), (10), or (12) or an item or tangible personal property under Section 151.316(b) or 151.3162(b), an exemption number must be stated on the exemption certificate provided by the purchaser.

(b) A person is eligible for an exemption number if the person uses or intends to use an item or property listed under Subsection (a) that qualifies for an exemption under Section 151.316 on a farm or ranch, as those terms are defined by Section 151.316(c), or that qualifies for an exemption under Section 151.3162 on a timber operation.

(c) A person who is eligible may apply to the comptroller for an exemption number. The application must:

(1) be on a form prescribed by the comptroller;

(2) if applicable, state the types of crops, livestock, or other agricultural products that are produced for sale on the farm or ranch on which the applicant will use or employ the item or property listed under Subsection (a) or state that the item or property will be used in relation to a timber operation;

(3) if applicable, state the name and address of the business owned or operated or to be owned or operated by the applicant in relation to which the applicant will use the exempt item or property; and

(4) contain any other information required by the comptroller.

(d) The comptroller by rule shall develop and implement a procedure by which an applicant may submit an application described by Subsection (c) electronically.

(e) The comptroller by rule shall establish a uniform date on which all exemption numbers issued under this section must be renewed, regardless of the date on which an exemption number is initially issued. The rules must require exemption numbers to be renewed every four years.

(f) The comptroller may not issue an exemption number that contains an individual's social security number.

(g) The comptroller, after adequate written notice and a hearing, may suspend or revoke the exemption number issued to a person who fails to comply with this chapter or with a rule adopted under this chapter. At the hearing the person must show cause why the person's exemption number should not be suspended or revoked.

(h) The comptroller shall give written notice of the suspension or revocation of an exemption number under Subsection (g) to the person to whom the number was issued. The notice may be personally served on the person or sent by mail to the person's address as shown in the comptroller's records.

(i) If the comptroller revokes a person's exemption number under Subsection (g), the person may not be issued a new exemption number unless the comptroller is satisfied that the person will comply with this chapter and the rules adopted under this chapter. The comptroller may prescribe the terms under which a suspended exemption number may be reinstated.

(j) A taxpayer may appeal the suspension or revocation of an exemption number in the same manner that appeals are made from a final deficiency determination.

(k) The comptroller by rule shall develop and operate an online system to enable a seller of an item or property described by Subsection (a) to search and verify the validity of the exemption number stated on an exemption certificate. A seller is not required to use the online system.

(l) An exemption certificate that states an exemption number is sufficient documentation of the seller's receipt of the certificate in good faith for purposes of Sections 151.054 and 151.104.

SECTION 2. Section 151.316(a), Tax Code, as amended by Chapters 1162 (H.B. 3144) and 1373 (S.B. 958), Acts of the 81st Legislature, Regular Session, 2009, is reenacted and amended to read as follows:

(a) Subject to Section 151.1551, the [The] following items are exempted from the taxes imposed by this chapter:

(1) horses, mules, and work animals;

(2) animal life the products of which ordinarily constitute food for human consumption;

(3) feed for farm and ranch animals;

(4) feed for animals that are held for sale in the regular course of business;

(5) seeds and annual plants the products of which:

(A) ordinarily constitute food for human consumption;

(B) are to be sold in the regular course of business; or

(C) are used to produce feed for animals exempted by this section;

(6) fertilizers, fungicides, insecticides, herbicides, defoliants, and desiccants exclusively used or employed on a farm or ranch in the production of:

(A) food for human consumption;

(B) feed for animal life; or

(C) other agricultural products to be sold in the regular course of business;

(7) machinery and equipment exclusively used or employed on a farm or ranch in the building or maintaining of roads or water facilities or in the production of:

(A) food for human consumption;

(B) grass;

(C) feed for animal life; or

(D) other agricultural products to be sold in the regular course of business;

(8) machinery and equipment exclusively used in, and pollution control equipment required as a result of, the processing, packing, or marketing of agricultural products by an original producer at a location operated by the original producer for processing, packing, or marketing the producer's own products if:

(A) 50 percent or more of the products processed, packed, or marketed at or from the location are produced by the original producer and not purchased or acquired from others; and

(B) the producer does not process, pack, or market for consideration any agricultural products that belong to other persons in an amount greater than five percent of the total agricultural products processed, packed, or marketed by the producer;

(9) ice exclusively used by commercial fishing boats in the storing of aquatic species including but not limited to shrimp, other crustaceans, finfish, mollusks, and other similar creatures;

(10) tangible personal property, including a tire, sold or used to be installed as a component part of a motor vehicle, machinery, or other equipment exclusively used or employed on a farm or ranch in the building or maintaining of roads or water facilities or in the production of:

(A) food for human consumption;

(B) grass;

(C) feed for animal life; or

(D) other agricultural products to be sold in the regular course of business;

(11) machinery and equipment exclusively used in an agricultural aircraft operation, as defined by 14 C.F.R. Section 137.3; and

(12) tangible personal property incorporated into a structure that is used for the disposal of poultry carcasses in accordance with Section 26.303, Water Code.

SECTION 3. Section 151.316(b), Tax Code, is amended to read as follows:

(b) Subject to Section 151.1551, tangible [Tangible] personal property sold or used to be installed as a component of an underground irrigation system is exempt from the taxes imposed by this chapter if the system is exclusively used or employed on a farm or ranch in the production of:

(1) food for human consumption;

(2) grass;

(3) feed or forage for:

(A) animal life the products of which ordinarily constitute food for human consumption; or

(B) horses, mules, and work animals; or

(4) other agricultural products to be sold in the regular course of business.

SECTION 4. Section 151.3162(b), Tax Code, is amended to read as follows:

(b) Subject to Section 151.1551, the [The] following items are exempted from the tax imposed by this chapter:

(1) seedlings of trees grown for commercial timber;

(2) defoliants, desiccants, equipment, fertilizers, fungicides, herbicides, insecticides, and machinery exclusively used in the production of timber to be sold in the regular course of business;

(3) machinery and equipment used in, and pollution control equipment required as a result of, the processing, packing, or marketing of timber products by an original producer if:

(A) the processing, packing, or marketing occurs at or from a location operated by the original producer;

(B) at least 50 percent of the value of the timber products processed, packed, or marketed at or from the location is attributable to products produced by the original producer and not purchased or acquired from others; and

(C) the original producer does not process, pack, or market for consideration timber products that belong to another person with a value greater than five percent of the total value of the timber products processed, packed, or marketed by the producer; and

(4) tangible personal property sold or used to be installed as a component of an underground irrigation system exclusively used in the production of timber to be sold in the regular course of business.

SECTION 5. Section 152.091, Tax Code, is amended by adding Subsection (a-1) and amending Subsections (b) and (c) to read as follows:

(a-1) In addition to the other requirements prescribed by this section, the exemption provided by Subsection (a) applies only if the person purchasing or using the machine, trailer, or semitrailer provides an exemption certificate with an exemption number issued to the purchaser or user under Section 151.1551.

(b)(1) The taxes imposed by this chapter do not apply to the purchase of a:

(A) farm machine, trailer, or semitrailer that is to be leased for use primarily for farming and ranching, including the rearing of poultry, and use in feedlots; or

(B) machine, trailer, or semitrailer that is to be leased for use primarily for timber operations.

(2) The exemption provided by this subsection applies only if the person purchasing the machine, trailer, or semitrailer to be leased presents the tax assessor-collector a form prescribed and provided by the comptroller showing:

(A) the identification of the motor vehicle;

(B) the name and address of the lessor and the lessee; [and]

(C) an exemption number issued to the purchaser under Section 151.1551; and

(D) verification by the lessee that the machine, trailer, or semitrailer will be used primarily for:

(i) farming and ranching, including the rearing of poultry, and use in feedlots; or

(ii) timber operations.

(3) If a motor vehicle for which the tax has not been paid ceases to be leased for use primarily for farming and ranching, including the rearing of poultry, and use in feedlots or timber operations, the owner shall notify the comptroller on a form provided by the comptroller and shall pay the sales or use tax on the motor vehicle based on the owner's book value of the motor vehicle. The tax is imposed at the same percentage rate that is provided by Section 152.021(b).

(c) The taxes imposed by this chapter do not apply to the rental of a farm machine, a trailer, or a semitrailer for use primarily for farming and ranching, including the rearing of poultry, and use in feedlots, or a machine, a trailer, or a semitrailer for use primarily for timber operations. The tax that would have been remitted on gross rental receipts without this exemption shall be deemed to have been remitted for the purpose of calculating the minimum gross rental receipts imposed by Section 152.026. The exemption provided by this subsection applies only if the owner of the motor vehicle obtains in good faith an exemption certificate from the person to whom the vehicle is being rented that includes an exemption number issued under Section 151.1551.

SECTION 6. Notwithstanding Section 151.1551, Tax Code, as added by this Act, a person is not required to state an exemption number on an exemption certificate or on a form prescribed by the comptroller of public accounts to qualify for an exemption under Section 151.316, 151.3162, or 152.091, Tax Code, that is claimed before January 1, 2012.

SECTION 7. The change in law made by this Act does not affect tax liability accruing before January 1, 2012. That liability continues in effect as if this Act had not been enacted, and the former law is continued in effect for the collection of taxes due and for civil and criminal enforcement of the liability for those taxes.

SECTION 8. To the extent of any conflict, this Act prevails over another Act of the 82nd Legislature, Regular Session, 2011, relating to nonsubstantive additions to and corrections in enacted codes.

SECTION 9. This Act takes effect September 1, 2011.