Is the labor to repair a manufacturing machine — like a threading machine directly used to manufacture products for sale — exempt from Texas sales tax the same way the machine itself is exempt?

Plain-English summary

Someone asked whether repairs to a threading machine used in manufacturing are taxable. The Comptroller explained how two related statutes work together:

• Tex. Tax Code § 151.318 exempts tangible personal property used directly in or during manufacturing, processing, or fabrication of tangible personal property for sale, if the property's use is necessary/essential to that process and it directly causes a chemical or physical change to the product being made.
• Tex. Tax Code § 151.3111(a) extends that exemption to the service of repairing, remodeling, or restoring the property: if the property itself would be exempt (because of its nature, its use, or a combination of both) at the time the service is performed, the repair/restoration service on it is exempt too. This repair-service exemption does not extend to services performed on real property — it's limited to tangible personal property.

Applying that framework: because the threading machine is used directly in or during manufacturing, processing, or fabrication (making it exempt equipment under § 151.318), the repair of that threading machine is also exempt from sales tax, and may be purchased tax-free by giving the repairman a properly completed exemption certificate.

What this means for you

Manufacturers with exempt production equipment

If your manufacturing machinery already qualifies for the § 151.318 manufacturing exemption, don't assume repairs to that machinery are automatically taxable — under § 151.3111(a), the repair/maintenance/restoration service itself is exempt too. Give your repair vendor a properly completed exemption certificate instead of paying tax.

Equipment repair and maintenance service providers

When a customer presents an exemption certificate for repair work on manufacturing equipment, confirm the underlying equipment genuinely qualifies for the § 151.318 exemption (directly used in manufacturing, necessary/essential to the process, causes a physical or chemical change to the product). If it does, the repair service itself follows the equipment's exempt status.

Accountants and tax professionals

This letter is a clean, compact statement of the § 151.3111(a) "exemption follows the property" rule for repair services — useful as a reference point for any TPP-repair taxability question. Remember the real-property carve-out: this pass-through exemption for repair services is limited to tangible personal property and doesn't reach realty-improvement repair work.

Common questions

Q: If my manufacturing machine is exempt from sales tax, is repairing it also exempt?
A: Yes. Under Tex. Tax Code § 151.3111(a), a repair, remodeling, or restoration service on property that would itself be exempt because of its nature or use is exempt too.

Q: Does this repair-service exemption apply to real property repairs?
A: No. The exemption under § 151.3111 does not extend to services performed on real property — only tangible personal property.

Q: How do I buy exempt repair services tax-free?
A: By giving the repairman a properly completed exemption certificate.

Q: Can I rely on this letter for my own equipment repairs?
A: No. This opinion is rendered based on the facts presented; other facts, though similar, may yield different results.

Citations and references

Statutes:

• Tex. Tax Code § 151.318 (manufacturing exemption for tangible personal property)
• Tex. Tax Code § 151.3111(a) (exemption for repair/remodeling/restoration services on otherwise-exempt property; does not extend to real property)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200005239L

Original ruling text

May 2, 2000

Dear **:

Thank you for your recent e-mail regarding the taxability of repairs to a
threading machine.

Section 151.318 of the Texas Tax Code exempts tangible personal property used
directly in or during the manufacturing of tangible personal property for sale
if the use of the property is necessary or essential to the manufacturing,
processing, or fabrication operation and directly makes or causes a chemical or
physical change to the product being manufactured, processed, or fabricated for
ultimate sale.

In addition, Section 151.3111(a) states a service performed on tangible
personal property that if sold, leased, or rented, at the time of the
performance of the service, would be exempted under this chapter because of the
nature of the property, its use, or a combination of its nature and use is
exempted from this chapter. The exemption for the repair, remodeling or
restoration under Section 151.3111 does not extend to services performed on
real property.

The repair of a threading machine used directly in or during the manufacturing,
processing or fabrication is exempt from sales tax. The repair of the threading
machine may be purchased tax-free by giving a properly completed exemption
certificate to the repairman.

To view the Texas Tax Code, please go to our web site address at
and click on "The Sales Tax" under the quicklink
column. Scroll down and click on "Chapter 151", and scroll down to specific
section of the statute.

This opinion is rendered based on the facts presented. Other facts though
similar, may yield different results.

If you have any questions or require additional information, you may call
1-800-531-5441, extension 6-5809. You may write to Tax Policy Division, P. O.
Box 13825, Austin, Texas 78711-3825. You may also submit inquiries to our tax
help Internet address at .

Sincerely

Emilio S. Lerma
Tax Policy Division