Did forklifts used inside a plant to move raw materials to mixing tanks qualify for Texas's phased-in manufacturing exemption?

Plain-English summary

The forklifts moved raw material within the plant to mixing tanks and performed the same function as the taxpayer's bulk-handling systems.

The Comptroller classified that work as intraplant transportation used in preparation for manufacturing. Sections 151.318(c)(2) and (4) specifically disqualified equipment moving items from process to process or location to location within the plant.

The letter contrasted that exclusion with the phased-in exemption for machinery, equipment, parts, and accessories with a useful life over six months that were necessary or essential and used during actual manufacturing.

Common questions

Were the forklifts exempt manufacturing equipment? No.

Why not? They moved material within the plant rather than performing the actual manufacturing operation.

Citations and references

• Tex. Tax Code § 151.318(c)(2) and (4)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9001L0980C01

Original ruling text

January 31, 1990

Dear *****:

Thank you for your letter concerning the partial refund of sales
tax on manufacturing equipment, specifically forklifts used in
your plant to move raw material to the mixing tanks.

You stated that the forklifts in your process do the exact same
functions as the bulk handling systems in your plant. Forklifts to
move raw material to the mixing tanks are intraplant transporta-
tion equipment used in preparation for manufacturing. Forklifts
and any other type of equipment or system used to move items being
manufactured from process to process or location to location are
intraplant transportation. Intraplant transportation is specifi-
cally disqualified from exemption by Sections 151.318(c)(2) and
(4) of the Texas Tax Code.

The phase-in tax exemption for manufacturers applies to machinery,
equipment, and replacement parts or accessories with a useful life
in excess of six months if the equipment is used or consumed in or
during the actual manufacturing of tangible personal property for
sale and the use or consumption of the property is necessary or
essential to the manufacturing operation.

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

If you have any questions or need additional information, you may
call me toll free at 1-800-252-5555, extension 3-4666, or the
regular number 512/463-4666. You may write to Tax Correspondence,
Comptroller of Public Accounts.

Sincerely,
Jo Ann Dieck
Tax Correspondence