Timber Exemptions – Sales, Motor Fuel and Motor Vehicle Taxes

An original producer can purchase, lease or rent tax free, machinery and equipment used in, and pollution control required as the result of, the processing, packing and marketing of their timber products under Texas Tax Code Section 151.3162, Timber Items. A purchaser claiming a timber operation exemption must provide a properly completed Form 01-925, Texas Timber Operations Sales and use Tax Exemption Certification (PDF) to the seller at the time of purchase. The certificate must include a valid Ag/Timber Number.

Exempt timber machinery and equipment include, but are not limited to

• chainsaws
• axes
• knucklebooms
• mulching machines
• winches
• dessicants
• grapples
• herbicides
• fertilizer spreaders

To qualify for the timber exemption, computers, software and related equipment must be used exclusively in a timber operation in the production of timber products, such as a computer used to operate or that is incorporated into production machinery (e.g., a computer-operated log cutter) would qualify for exemption. However, computers used for accounting or bookkeeping, social media, gaming, emails, etc. are not used exclusively to produce timber products and, therefore, would not qualify for the exemption.

A purchaser claiming the timber operation exemption on the purchase of a computer, software or related equipment must provide a properly completed Form 01-925, Texas Timber Operations Sales and use Tax Exemption Certification (PDF) to the seller at the time of purchase. The certificate must include a valid Ag/Timber Number.

If a computer that was initially purchased tax free is subsequently used in a non-qualifying manner, the exemption no longer applies. The purchaser must remit use tax on the computer’s original sales price directly to the Comptroller’s office using Form 01-156, Texas Use Tax Return (PDF).

Supplies used in timber production that qualify for sales and use tax exemption when purchased with an exemption certificate include, but are not limited to

• electricity
• ear protection devices
• insecticides
• lubricants
• eye protection goggles
• seedlings

Gasoline cannot be purchased tax free; however, a timber operation can apply for a refund (PDF) of tax paid on gasoline used in off-highway equipment such as chainsaws and generators. A refund claim must be postmarked within one year from the first day of the month following the date of use (if withdrawn from storage) or purchase, whichever is later. For example, if the gasoline was purchased or used on Jan. 18, 2020, the claim must be filed by Feb. 1, 2021.

For state tax purposes, diesel fuel is sold in two forms: clear and dyed.

Clear Diesel
Clear diesel is intended for highway use, and all purchases of clear diesel fuel are taxable, including clear diesel fuel used in off-highway equipment such as excavators and bulldozers. There is no tax exemption or refund for the purchase of clear diesel fuel.

Dyed Diesel
Dyed diesel fuel is intended for off-highway use. Dyed diesel used to power off-highway equipment, such as knucklebooms, loaders and crawler carriers, is not subject to state motor fuel tax and can be purchased tax free directly from a fuel supplier.

A timber operation is not required to have a state fuels tax license when a supplier pumps dyed diesel directly into the fuel tank of off-highway equipment. The fuel supplier must maintain required fuel records and documentation to verify the purchase.

If a timber operation purchases dyed diesel in bulk (i.e., fuel supplier delivers dyed diesel into a storage tank), the timber operation will need to apply for a Dyed Diesel Signed Statement Number by submitting Form AP-197, Texas Dyed Diesel Fuel End User Signed Statement Number (PDF) to the Comptroller’s office. This allows for the purchase of up to 10,000 gallons of tax-free dyed diesel per month for use in off-highway equipment operated in Texas for non-agricultural purposes such as timber operations.

A timber machine is a self-propelled motor vehicle specifically adapted to perform a specialized function for use primarily in timber operations, such as land preparation, cultivating, maintaining and harvesting commercial timber.

The term “timber machine” does not include

• crew vehicles;
• field service vehicles; or
• self-propelled motor vehicles specifically designed or adapted to transport timber or timber products, including those designed to transport cargo and adapted with a cargo-loading device.

A timber trailer is a trailer or semitrailer designed for and used primarily in a timber operation.

Motor Vehicle Tax
To claim an exemption from motor vehicle tax on the purchase of a qualified timber machine or trailer the purchaser must provide the dealer a properly completed Form 14-319, Texas Motor Vehicle Exemption Certificate for Agricultural and Timber Operations (PDF).

The exemption must also be claimed at the time of titling and/or registration with the county tax assessor-collector (CTAC) by entering a current Ag/Timber Number on Form 130-U, Application for Texas Title and/or Registration (PDF).

For information on registering or renewing the registration of a motor vehicle with farm plates, contact your local CTAC or the Texas Department of Motor Vehicles (TxDMV).

Motor Vehicle Rental Tax
When claiming an exemption from gross rental receipts tax on the rental of qualifying timber machines or trailers, the timber operation must provide the rental company a properly completed Form 14-305, Motor Vehicle Rental Tax Exemption Certificate (PDF).