Was armored-car security for transporting precious-metal by-product bars to a refinery exempt as a service making a manufactured product more marketable?

Plain-English summary

The copper processor produced bars containing gold, silver, and platinum and used armored-car security to transport them to another location for precious-metal extraction.

The customer claimed § 151.318(a)(3), which exempted certain services performed directly on a manufactured product before sale to make it more marketable.

The Comptroller rejected the exemption because the security service did not make the bars more marketable. The provider had to collect tax and could not accept an exemption certificate for the service.

Common questions

Was the armored-car service exempt? No.

Why did the manufacturing exemption fail? Security during transport did not make the product more marketable.

Could the provider accept an exemption certificate? No.

Citations and references

• Tex. Tax Code § 151.318(a)(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/8911L0970E01

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

November 27, 1989

Dear **:

Mr. Ledford Kelly has asked me to reply to your inquiry regarding
the taxability of security services rendered by CORP A to CORP B
in El Paso.

Mr. Kelly explained that Dorie Anodes are a by-product of copper
processing. Dorie Anodes are a metal bar containing gold, silver
and platinum and are transported to a location in the Pan Handle
where the precious metals are extracted.

The customer is claiming an exemption and refund of sales tax paid
on the security service provided when the bars are transported by
armored car. The customer believes that the service is exempt
under Sec. 151.318(a)(3). That section exempt services performed
directly on a product being manufactured prior to its distribution
or sale and for the purpose of making the product more marketable.

The exemption does not apply to the security service provided by
CORP A because the security service does not have the effect of
making the product more marketable. CORP A may not accept an ex-
emption certificate instead of collecting tax on the service.

If you have any questions or need more information please call our
toll-free number 1-800-531-5441; the regular number is (512) 463-
4861. You may write me at the Taxability Section of Legal Ser-
vices Division.

Sincerely,
Tom Soto
Legal Service Division
Taxability Section