Texas Taxes for Agriculture and Timber Industries

Farmers and ranchers are not exempt entities; nor are all purchases that farmers and ranchers make exempt from sales tax. Some agricultural items, however, are exempt, while others are taxable unless purchased for exclusive use on a commercial farm or ranch in the production of food or other agricultural products for sale.

For sales tax purposes, a farm or ranch is land used wholly or in part in the production of crops, livestock and/or other agricultural products held for sale in the regular course of business. Examples of farms and ranches include commercial greenhouses, feed lots, dairy farms, poultry farms, commercial orchards and similar commercial agricultural operations. A farm or ranch is not a home garden, timber operation, kennel, land used for wildlife management or conservation, land used as a hunting or fishing lease or similar types of operations that do not result in the sale of agricultural products in the normal course of business.

Certain items used exclusively in the production of timber for sale in the regular course of business qualify for exemption from Texas sales and use tax. Timber production includes activities to prepare the production site, and to plant, cultivate, or harvest commercial timber that will be sold in the regular course of business; and the construction, repair, and maintenance of private roads and lanes exclusively used for access to commercial timber sites. Learn more about Sales and Use Tax

Motor Vehicle Tax

Farm machines, trailers and semitrailers used primarily for farming and ranching, including machines and trailers used primarily in poultry operations and on feedlots, qualify for exemption from Texas motor vehicle tax. Learn more about Motor Vehicle Sales and Use Tax.

Motor Fuels Tax

Texas imposes a tax of twenty cents ($.20) per gallon on motor fuel. The tax is imposed when motor fuel is removed from the terminal rack and included in the price paid at the pump.

Gasoline

A producer of agricultural or timber products can get refunds of tax paid on gasoline used in power take-off equipment or auxiliary power units, off-highway equipment, stationary engines and for other non-highway purposes. Learn more about Gasoline Tax.

Diesel

All purchases of clear diesel fuel are taxable, including clear diesel used in power take-off equipment or auxiliary power units, off-highway equipment, stationary engines and for other non-highway applications. Dyed diesel used exclusively to power non-highway agricultural equipment, such as a tractor or combine, on a farm or ranch can be purchased tax-free. A farm or ranch can be a feedlot, dairy farm, poultry farm, commercial orchard, commercial nursery or similar commercial agricultural operation. Unlike sales tax, agricultural use for purposes of the fuels tax exemption also includes dyed diesel used to power non-highway equipment used in a timber operation or for wildlife management as defined by the Property Tax Code, Section 23.51(7). A home garden however does not qualify. Learn more about Diesel Fuel Tax.

Franchise Tax

Texas franchise tax applies to partnerships (general, limited and limited liability), corporations, LLCs, business trusts, professional associations, business associations, joint ventures and other legal entities. Learn more about Franchise Tax.

Property Tax

Property taxes—also called ad valorem taxes—are locally assessed taxes levied by local taxing units. The state does not have local tax records on each property and its ownership and does not set property’s value for property taxes. State law allows the Comptroller’s office to advise local governments and taxpayers on property tax issues, but it cannot intervene in local tax matters. The county appraisal district appraises property located in the county, while local taxing units set tax rates and collect property taxes based on those values. Land that qualifies for an agricultural appraisal has a lower taxable value for property tax purposes. Qualified agricultural lands are based on the land’s capacity to produce agricultural products, including timber, rather than its market value. Learn more about Property Tax.