The Comptroller has answered some FAQs about horse businesses that give a little insight on how various circumstances will be treated. On the very first page of the application, the State boldly warns horse racing, boarding, and training businesses that they do NOT qualify for an ag exemption registration number. Under the list of “principal types of exempt activities” on page 2, the only activity on the list that involves horses states, “I raise and sell horses, mules, donkeys, burros and/or ponies.” The application and other applicable authority suggests that “raising and selling horses” must be your principal activity or your “normal course of business” in order to qualify for the sales tax exemption. The States’s intent with respect to mixed operations such as boarding operations who also breed and sell horses is not altogether clear. I’m not sure what the State’s intent was in enacting this new law, but I don’t think its affects will be good for many horse businesses. I predict that many Texas horse business owners that have been buying ag supplies tax free in the past will not be able to successfully apply for a registration number in 2012 (at least if they are honest on the application). A link to the application for the new registration number can be found here. Texas Farm Bureau discussed the new law and posted information for farmers on its blog, Texas Ag Talks. According to the Texas Farm Bureau blog post, the new “registration number” will be good for the overall agricultural industry, because abuses under the current system were so rampant that the agricultural sales tax exemption itself was at risk. When I was home in Ellis County last weekend, I heard several farmers grumbling about this new requirement and the added “red tape” being imposed on farmers. But is it such a bad thing? Texas Farm Bureau doesn’t think so. Learn more about outsourcing exemption certificate management.Currently, anyone in Texas can say they are “ag exempt”, sign a form, and buy agricultural products tax free. But this is about to change. As of January 1, 2012, the Texas Comptroller will require all farmers and ranchers to obtain an Agricultural Sales Tax Exemption Registration Number in order to buy tax-free farm and ranch supplies. This new measure was signed into law during the 2011 Legislative Session via House Bill 268, and will be included in Chapter 151, Subchapter E of the Texas Tax Code. Additional information is available through the Texas Comptroller.
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