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Texas Agriculture Archive

February 21, 2003

Farmers and ranchers in Texas benefit from two tax provisions that are critical to the future survival of agriculture in our state: the exemption from sales and use taxes on purchases of farm inputs and products, and the provision for property tax valuation based on the productive value of land rather than market value.

With the current budget situation facing the state, we have been concerned that these tax treatments might be under attack. Two pieces of legislation have been filed which would negatively alter the current tax treatment for producers.

House Bill 578 by Representative Yvonne Davis of Dallas would repeal numerous sections of the tax code relating to sales tax exemptions. The bill targets the sales tax provisions so important to agriculture. The most important section would repeal the exemption for agricultural items, including horses, mules, work animals, feed, seed, fertilizer, machinery, and equipment to be used for agricultural purposes, commonly referred to as "feed, seed and fertilizer." Other sections would repeal exemptions relating to water, timber items, gas, electricity, and agribusiness items.

A second bill by State Representative Ron Wilson of Houston would repeal agriculture use valuation in cities with a population of 500,000 or more. According to the proposed legislation, land is not eligible to be designated for agricultural use, open-space land, or timber land if the land is located inside the corporate limits of a city or town. Only land outside of towns with populations of 500,000 or more would be eligible for the agricultural-use value appraisal and the accompanying tax benefits.

It should be noted that the sales and use tax exemptions are not restricted to agriculture but to all inputs of husbandry as well as manufacturing inputs. It would be unlikely that repeal of the exemption on sales and use taxes would be restricted to only agriculture.

Protection of these two tax treatments have been designated by the Texas Farm Bureau Board of Directors as the highest priority item on our legislative wish list. While neither of these bills have been referred to committee at this time, we urge you to contact your state legislators to work and vote against these propositions (particularly those in urban and suburban areas). Passage of these two bills would greatly impact Texas agriculture as we know it.

The TFB Legislative Staff in Austin can be reached at 512/472-8288.