How did Texas tax industrial gases, propane, sterilizing or cleaning gases, breathing-air refills, and cylinders when the buyer supplied only limited use facts?

Plain-English summary

The requester did not identify its exact business, manufactured product, or each item's specific use, so the Comptroller gave general guidance rather than a complete item-by-item determination.

Oxygen and acetylene consumed while manufacturing a product for sale qualified for exemption; the same gases used to repair equipment were taxable. Under Rule 3.300(3), nitrogen and other gases used or consumed in manufacturing, to protect the product, or to protect the environment were exempt. The letter said argon, helium, and hydrogen might qualify based on the limited description.

Propane was a fuel outside the limited sales tax. Propane used in off-road fork trucks was not subject to motor-fuel tax, while propane used in highway vehicles was subject to that tax.

The letter found no apparent exemption for liquid chlorine used to sterilize drinking water or carbon dioxide used to clean tanks and vessels. It could not resolve the undefined "breathing air" charge, but said a service comparable to refilling a diver's air tank was not taxable.

Renting an empty cylinder was taxable. When buying the contents of a filled cylinder, the customer was charged tax only on the contents; the person filling it was the taxable consumer of the cylinder.

Common questions

Were welding gases exempt? Only when consumed in qualifying manufacturing; repair use was taxable.

Was off-road forklift propane subject to motor-fuel tax? No.

What about propane used on highways? It was subject to motor-fuel tax.

Were empty-cylinder rentals taxable? Yes.

Citations and references

• 34 Tex. Admin. Code Rule 3.300(3)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8910L0964F12

Original ruling text

October 17, 1989

Dear **:

Thank you for your letter dated October 11, 1989, concerning the taxability of
various gasses and fuels that your company purchases.

You did not indicate the type of business that COMPANY A engages in
specifically or what product COMPANY A manufacturers for sale or the specific
used of each of these items. Therefore, my response will be very general. For
example, you indicated that the company purchases oxygen and acetylene for
welding purposes. Oxygen and acetylene consumed in the process of manufacturing
a product for sale qualify for exemption from sales tax. Oxygen and acetylene
used to repair equipment are taxable.

I have enclosed a copy of Rule 3.300. Please review section (3). According to
this rule, nitrogen and other gasses used by a manufacturer to protect the
product or to protect the environment are exempt, as are the gasses that are
used or consumed in the actual manufacturing of the product. Based on your
description, it appears that the argon, helium, and hydrogen might be included
in this category.

Propane is a fuel and not subject to limited sales tax. Propane that is used in
off-road fork trucks is not subject to the motor fuel tax. However, any propane
used to fuel a vehicle for use on the highways is subject to the motor fuel
tax.

There does not appear to by any exemption for liquid chlorine used to sterilize
your drinking water or carbon dioxide used in cleaning tanks and vessels. I'm
not sure what you mean by "breathing air used by employees at certain times".
If this is similar to the fee paid for refilling a tank such as a diver uses,
the service is not taxable.

The rental of any empty cylinder is subject to sales tax. If you are buying the
contents of a filled cylinder, you should be charged tax on the contents only.
The cylinders are taxable to the person who fills them.

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

Please fee free to contact me if you have any additional questions. You write
me, call toll free 1-800-252-5555 (ext. 3-4684) from anywhere in the United
States or phone 512/463-4685.

Sincerely,

Julie Pesl
Tax Correspondence