Texas Agricultural Exemption: Ag Valuation and Sales Tax Exemption for Farms and Ranches

The term Texas ag exemption usually refers to one of two separate programs, and people often apply for one assuming it covers the other. The first is a property tax break: agricultural valuation of land, administered by your county appraisal district. The second is a sales tax exemption on qualifying farm and ranch purchases, administered by the Texas Comptroller through an Agricultural and Timber Registration Number. You can qualify for one, both, or neither. Getting one does not give you the other.

This guide is informational content, not legal or tax advice. Your results depend on your land, the entity that owns it, and how you use it. For a large parcel, a business entity, or any rollback question, consult a qualified CPA or attorney, and confirm figures with the agency named in each section.

Program 1: Agricultural (1-d-1) Valuation of Land

Texas appraises land at market value by default. Under Tax Code Chapter 23, Subchapter D, land that qualifies is appraised based on its agricultural productivity instead. For land in areas where prices reflect development or recreational value, that can produce a much lower taxable value.

Who qualifies

• The land must be devoted principally to agricultural use, to the degree of intensity generally accepted in the area (Tax Code Section 23.51).
• It must have been used that way for five of the preceding seven years.
• You do not need farming to be your main source of income. Landowners who lease the land to a working operator, or who run a modest herd, can qualify if the use test is met.

How and when to apply

Apply to the chief appraiser of your county appraisal district by April 30. One extension of up to 60 days is available for good cause. A late application approved after the deadline carries a 10% penalty, so do not treat the extension as a routine option. Contact your appraisal district early, request the application, and ask what records it accepts as proof of use.

Renewal and changes

Once approved, you generally do not reapply every year. You do need to act when the facts change: report a change in ownership or a change in use, and respond if the appraiser asks for information. Keep your own records of livestock counts, harvest, leases, and other evidence of use so that a request can be answered quickly.

Rollback tax

If the land stops qualifying, for example because it is converted to a residential subdivision or another non-agricultural use, a rollback tax applies for the three preceding years (Tax Code Section 23.55). The rollback is the additional tax that would have been due at market value for those years. Ask the appraisal district how it calculates the amount and whether any interest applies, because the answer depends on your parcel and the year of change.

Program 2: Ag/Timber Number and the Sales Tax Exemption

The Texas Comptroller issues an Agricultural and Timber Registration Number, usually called the Ag/Timber Number. You give that number to a seller on Form 01-924 so you can buy qualifying farm and ranch inputs without paying sales tax, but only when those items are used exclusively in agricultural production. The state sales tax rate is 6.25%, and local rates can add more, so the exemption matters most on large purchases of inputs.

• Exclusive use is the test. If you buy an item under the exemption and then use it for something else, such as a personal project, the exemption does not hold for that use.
• Renewal. The number is renewed every four years.
• Motor vehicles. Trucks and other motor vehicles need a separate certificate. A Form 01-924 does not cover a vehicle purchase. Confirm with the Comptroller which vehicle certificate applies to you.
• No effect on property tax. The Ag/Timber Number does not lower the appraised value of your land, and the appraisal district does not issue it.

For the current list of qualifying items and the forms, start at the Comptroller's tax page at comptroller.texas.gov/taxes.

Side-by-Side Comparison

Feature	Ag valuation (1-d-1)	Ag/Timber Number
Administered by	County appraisal district (chief appraiser)	Texas Comptroller
What it reduces	Property tax on qualifying land	Sales tax on qualifying farm and ranch inputs
Timing	Apply by April 30; no yearly reapplication	Renewed every four years
Main ongoing duty	Report ownership or use changes	Use items exclusively in agricultural production
Cost of losing eligibility	Rollback tax for the three preceding years	Confirm consequences with the Comptroller
Vehicles	Not applicable	Motor vehicles need a separate certificate

If You Are Farming Through a Business

Most people searching for a Texas ag exemption are landowners who want the property tax break. If you are starting a farm or ranch business, the two programs above are only part of the setup, and the business side has its own requirements.

• No general state business license. Texas does not issue or require a general state business license. You still need to identify the licenses, permits, and registrations your specific activity requires at the federal, state, and local level. The Texas Business Licenses and Permits Guide, published by the Business Permit Office within the Texas Economic Development and Tourism Office, is the state's reference for this.
• Counties license nothing for most businesses. The main county filing is an assumed name certificate for a sole proprietor, which is filed with the county clerk.
• LLC formation. The Certificate of Formation (Form 205) costs $300 and is filed with the Texas Secretary of State through SOSDirect. The name must contain an organizational designation such as LLC or Limited Liability Company. Check name availability on the Secretary of State business search before filing.
• Assumed name for an LLC or corporation. The assumed name certificate (Form 503) is $25 and is filed with the Secretary of State. Since September 1, 2019, LLCs, corporations, and other registered filing entities no longer also file with the county clerk. Sole proprietors and general partnerships still file with the county clerk, and county fees vary.
• Registered agent. A domestic LLC must keep a registered agent and registered office in Texas. The entity cannot serve as its own agent, and the office must be a physical street address where the agent can be personally served during business hours. A post office box alone does not qualify. A change of agent or office costs $15.
• Franchise tax, not income tax. Texas has no state personal income tax and no corporate income tax. Entities are subject to the franchise tax, a privilege tax administered by the Comptroller. For the 2026 and 2027 report years, the no tax due threshold is $2,650,000 in total revenue. Entities at or below that amount owe no tax but must still file the Public Information Report, which is due May 15 each year to the Comptroller.
• No publication requirement. Texas does not require a new business to publish a notice in a newspaper.
• Sales tax permit. If you sell taxable goods or services, you typically need a sales and use tax permit from the Comptroller. It is issued at no charge and usually takes two to three weeks to process.

Whether the land sits in the business entity or in your personal name affects both programs and the liability picture. Decide that with a CPA or attorney before you transfer title. The Texas Small Business Development Center Network at sbdctexas.org also offers free advising for business setup questions.

Step-by-Step Checklist

1. Confirm the use history. Check that the land has been used principally for agriculture for five of the preceding seven years, and gather leases, livestock records, and harvest records.
2. Contact your county appraisal district, request the agricultural valuation application, and file it by April 30.
3. Respond promptly to any appraiser request for information, and keep copies of everything you send.
4. Obtain your Ag/Timber Number from the Comptroller and confirm the current application process on the Comptroller's site.
5. Give Form 01-924 to vendors when buying qualifying inputs, and keep records showing exclusive agricultural use.
6. Calendar the April 30 deadline, the four-year Ag/Timber Number renewal, and the May 15 Public Information Report deadline if you have an entity.
7. If you are forming an LLC, file the Certificate of Formation, maintain your registered agent, and confirm which state and local licenses your activity needs.

Common Mistakes

• Assuming you must earn farm income. The valuation program does not require farming to be your main income source.
• Assuming the Ag/Timber Number lowers property taxes. It applies to sales tax on qualifying purchases only.
• Missing April 30. A late application can be approved only in limited cases, and a 10% penalty applies when it is.
• Letting ownership change without reporting it. Report changes and confirm with the appraiser how the valuation carries forward.
• Using exempt inputs for non-agricultural purposes. The exemption depends on exclusive agricultural use.
• Using a form for the wrong purchase. A Form 01-924 does not cover a motor vehicle.

Where to Confirm Current Details

• Texas Comptroller of Public Accounts: comptroller.texas.gov/taxes (Ag/Timber Number, sales tax permit, franchise tax)
• Texas Secretary of State: sos.state.tx.us/corp (entity filings and assumed names)
• Your county appraisal district: find the office for your county through your county website, and ask the chief appraiser's office about the agricultural valuation application and deadline.
• Texas Small Business Development Center Network: sbdctexas.org

Texas rules for agricultural land and farm purchases are fact-specific. Confirm the current application forms, deadlines, and fees with the agency before you rely on them, and bring a CPA or attorney into any decision involving a large parcel, an entity, or a possible change of use.