Untitled Texas Attorney General Opinion ( 1977 )


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  • The Honorable Joe Hubenak             Opinion No. Ii-932
    Chairman
    Committee on Agriculture &            Re: Application of sales
    Livestock                        tax exemption to machinery
    Texas House of Representatives        and equipment used by an
    State Capitol                         agricultural cooperative.
    Austin, Texas 70767
    Dear Chairman Hubenak:
    you have requested our opinion whether the sales tax
    exemption described in article 20.04(N) (6), Taxation-General,
    applies to machinery and equipment used by an agricultural
    cooperative association organized pursuant to articles 5737-
    5764, V.T.C.S. We assume in answering your inquiry that
    you are referring to an agricultural cooperative which
    handles, processes or markets the goods grown by its members.
    The sales tax exemption of article 20.04(N)(6) applies to:
    Machinery or equipment exclusively used or
    employed on farms or ranches in the pro-
    duction of food for human consumption,
    production of grass, the building or
    maintaining of roads and water facilities,
    feed for any form of animal life, or other
    agricultural products to be sold in the
    regular course of business, and machinery,
    ooseneck trailers exclusive1
    p. 3894
    The Honorable Joe Hubenak - page 2 (H-932)
    As you note, the underscored portion of subsection 6 was
    added to the statute by House Bill 2195, 64th Legislature.
    The Comptroller of Public Accounts, in Ruling .016,
    effective July 20, 1976, has interpreted subsection 6 to
    exempt machinery and equipment used by agricultural cooperatives
    in the processing, packing and marketing of agricultural
    products. As an author and sponsor of the bill and as
    chairman of the committee which favorably reported House
    Bill 2195, you state that the bill was intended merely to
    clarify the statutory sales tax exemption available to a
    farmer purchasing equipment for use on his farm or for use
    at a location elsewhere for processing his own agricultural
    commodities, and was not intended to apply to machinery
    purchased by cooperative associations.
    The legislative history of House Bill 2195 appears to
    support your position. The bill analysis distributed in
    connection with House Bill 2195 noted that under existing
    law, machinery or equipment used in the production of
    agricultural products was exempt from the sales tax, but
    that machinery and equipment used in processing, packaging
    or marketing of these products was not exempt. The
    analysis stated that House Bill 2195:
    Clarifies farm machinery and equipment
    exempt from sales tax. State Comptroller
    asked that this legislation be enacted to
    clarify the statutes to conform with the
    farm usage of machinery and equipment.
    The fiscal note regarding House Bill 2195 stated:
    No fiscal implication or additional cost
    to the State attributable to the bill,
    should it be enacted, is anticipated.
    Thus, it seems clear to us that the Legislature, in enacting
    House Bill 2195, contemplated no major extension of existing
    exemptions to the sales tax.
    The exemption of machinery or equipment purchased by
    agricultural cooperatives from the sales tax could hardly
    be said to have "no fiscal implications." The University
    of Texas Natural Fibers Economic Research Division's Cotton
    Ginning Cost Study for the 1974-75 Season reported that the
    p. 3895
    The Honorable Joe Hubenak - page 3 (H-932)
    cost of new gins being built at that time was in the "one-
    half million dollar range or more." 
    Id. at 37..
    The 1975-76 Texas
    Cooperative Handbook lists over 200 cooperative ginners in
    Texas, and over 200 other cooperative associations of various
    types, including grain elevator associations, food locker
    associations, and feed and supply associations. The exemp-
    tion of industry segments of this size from the sales taxi
    would appear to have some fiscal implications to the State.
    We likewise find difficulty in concluding that the
    express language of the statute lends itself to an interpretation
    exempting machinery used by cooperatives. The exemption
    applies specifically to machinery
    exclusively used . . . by the orginal
    producer at a location operated by the
    original producer exclusively for . . ..
    his own products. Tax.- Gen. art. 20.04(W) (6).
    While agricultural products delivered by a producer to a third
    party. including a cooperative, for storage and ultimate
    sale remain "in the hands of the producer" for purposes of
    ad valorem taxation, Attorney General Opinions M-632 ~(1970)
    E2,   V-511 (1948) at 3, O-5405 (1943) at 7, thatis not to
    say that cooperative associations are operated by the original
    producer exclusively for processing, packing or marketing
    his own products.
    We think that machinery and equipment utilized by an
    agricultural cooperative association to process, pack or
    market its members' products is neither "operated by the
    original producer" nor used "exclusively for . . . his own
    products," and is not, therefore, within the sales tax
    exemption of article 20.04(N) (6), Taxation-General. Our
    view is reinforced by the "well settled [rule] that exemptions
    from taxation . . .. should be strictly construed." city of
    Amarillo v. e,     
    356 S.W.2d 325
    , 328 (Tex. Civ. App. --
    Amarillo m62, writ ref'd n.r.e.).
    SUMMARY
    The exemption from the sales tax of
    machinery and equipment exclusively used
    in the processing, packing or marketing
    of agricultural products by the original
    p. 3896
    The Honorable Joe Hubenak - page 4 (H-932)
    producer does not extend to inachineryand
    equipment utilized by an agricultural
    cooperative association to process, pack
    or market its members' products.
    Very truly yours,
    jwb
    p. 3897
    

Document Info

Docket Number: H-932

Judges: John Hill

Filed Date: 7/2/1977

Precedential Status: Precedential

Modified Date: 2/18/2017