Ezel / Tax Rulings / TX
TX 8601L0694E01 Sales and/or Use Tax (State,Local,MTA) 1986-01-29

Did greasing, painting, rebuilding, or overhauling used drilling bits qualify for Texas manufacturing exemptions?

Short answer: Rebuilding or overhauling qualified as remanufacturing, but greasing or painting did not; exemption applied only to items used exclusively in qualifying work.

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This page answers the general question as of 1986. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1986
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official 1986 Texas Comptroller taxpayer-response letter based on a company performing minor touch-ups or rebuilding discarded drilling bits before resale. It expressly says different facts could change the opinion. Current manufacturing, remanufacturing, equipment, replacement-part, useful-life, and exclusive-use rules may differ, and STAR documents may no longer represent current policy even when not marked superseded. Letters on STAR can support detrimental reliance only for the taxpayer to whom the letter was directly issued under 34 Tex. Admin. Code Rules 3.1 and 3.10. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The company bought discarded drilling bits, performed either minor touch-ups or more extensive rebuilding, and then resold them. The Comptroller said labor to grease or paint a used bit was not manufacturing, while rebuilding or overhauling a bit into working order qualified as remanufacturing.

Manufacturing exemptions under Rule 3.300 were available only for items used exclusively in rebuilding or overhauling. The letter's example was a replacement part lasting less than six months for a sander used in both qualifying and nonqualifying operations; that part did not qualify.

Common questions

Did greasing or painting a used bit qualify as manufacturing? No.

Did rebuilding or overhauling qualify? Yes, as remanufacturing under the letter.

Did equipment or parts used in both operations qualify? No. The letter required exclusive use in rebuilding or overhauling.

Citations and references

  • Texas Comptroller Rule 3.300 — manufacturing exemptions cited in the letter.

Source

Original ruling text

January 29 1986

Dear ***:

Thank you for your letter dated January 17, 1986 concerning the rebuilding
and subsequent sale of discarded drilling bits.

Your company buys discarded bits and does minor touch-ups, such as
greasing and painting, or rebuilds a bit so that it is in working
order before selling it to your customers.

The labor to grease or paint a used bit cannot be considered manufacturing.
The labor to rebuild or overhaul a bit does, however, qualify as remanufacturing.
You may qualify for the manufacturing exemptions listed in Rule 3.300 only on
those items used exclusively in rebuilding or overhauling a bit. For instance,
a replacement part lasting less than six months for a sander used in both
operations will not qualify for exemption.

This opinion is based on the facts presented. If there are additional or different
facts, the opinion may change.

If you have any questions or need more information, please call us at
1-800-252-5555 toll free from anywhere in Texas. You may write us at the
Tax Administration Division.

Sincerely,

Tax Policy Section
Tax Administration Division

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