Did soluble oil, hydraulic oil, and Cyclean filter paper used to manufacture aluminum cans qualify for Texas's manufacturing exemption?

Plain-English summary

The manufacturer used soluble oil mixed with water as a drawing emulsion in the cupper and as a cooling and friction-reducing agent while the bodymaker stretched aluminum cups into cans. The Comptroller said the soluble oil used in both stages qualified for the manufacturing exemption under Rule 3.300(d)(3).

Hydraulic oil used in the press machine that drove the bodymaker's rams also qualified.

After forming, the cans were washed and the removed oil was filtered for reuse. The Cyclean filter paper used in that filtration system did not qualify for the manufacturing exemption.

What this means for you

The historical result distinguished oils used in the production machinery and process from filter paper used to refurbish oil after it was washed off the cans.

Common questions

Was soluble oil exempt? Yes, for the two described production stages.

Was hydraulic oil exempt? Yes.

Was Cyclean filter paper exempt? No.

Citations and references

• 34 Tex. Admin. Code Rule 3.300(d)(3) — historical manufacturing exemption.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8801L0922A11

Original ruling text

January 9, 1988

Dear ***:

I am responding to your letter requesting the taxability status of soluble oil,
hydraulic oil, and cyclean filter paper.

You stated that your company manufactures aluminum cans. You further explained
that the soluble oil is mixed with water and is used as a drawing emulsion in the
cupper. The cupper presses the cups out of the aluminum and these cups are sent
to the bodymaker which stretches the aluminum cups into cans. Soluble oil is used
in this stage of manufacturing by acting as a cooling agent to reduce friction while
the cups are being stretched into cans. The soluble oil used in these two stages
qualifies for the manufacturing exemption provided in Rule 3.300 section (d)(3), enclosed.

You also questioned the taxability of hydraulic oil which is used in the press machine.
This machine contains gears used to drive rams on the bodymaker; the driving of these rams
gives the bodymaker the steam to stretch the cups and form the aluminum can.
This hydraulic oil also qualifies for the exemption in Rule 3.300 section (d)(3).

After the cans are formed, they go through a washing cycle. The oil is washed off
the cans and the oil is sent through a filtration system to be refurbished and then
reused. The filtration system uses filter paper called cyclean. The cyclean Raper does
not qualify for the manufacturing exemption provided in Rule 3.300.

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

You may write Tax Correspondence, Comptroller of Public Accounts.

Sincerely,

Tax Correspondence