Were drums and liners used to package a manufacturer's products exempt after October 1, 1991, and did returnability change the treatment?

Plain-English summary

Drums used to package the manufacturer's products remained exempt on and after October 1, 1991 as long as customers did not return them for refilling. Returnable drums were taxable to the manufacturer when purchased.

The liners also qualified for exemption. The letter explained that the sales-tax-law change for wrapping and packaging did not apply to containers such as drums and cylinders and did not remove the manufacturing-process exemption for supplies such as liners, steel bands, and twine.

What this means for you

Returnability controlled the drum result, while the liners remained exempt as manufacturing-process packaging. A reusable container sent back for refilling received different treatment from a nonreturnable package.

Common questions

Were nonreturnable drums exempt? Yes. Were returnable drums exempt? No. Were liners exempt? Yes. Did the October 1991 law change remove the manufacturer's packaging exemption? No.

Citations and references

• The letter does not identify a numbered statute or administrative rule.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9110L1137E07

Original ruling text

October 2, 1991

Dear ****:

Thank you for your letter of August 20, 1991, concerning the
taxability of the drums and liners used to package the products
that your company manufactures.

The drums will still qualify for exemption on or after October 1,
1991, as long as they are not returned to you for refilling. If
the drums are returnable containers, you are required to pay sales
and use tax on them when you purchase them. The liners will also
qualify for exemption. The change to the sales tax law regarding
wrapping, packing, and packaging materials does not apply to
containers (i.e. drums, cylinders, etc.) and does not affect the
exemption for wrapping, packing, and packaging materials (i.e.,
liners, steel bands, twine, etc.) used by manufacturers and
processors as part of the manufacturing process.

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

You may call toll free 1- 800- 252-5555 if you have any questions
or need more information. You may write to Tax Administration
Division, Comptroller of Public Accounts.

Sincerely,

Eddie C. Washington
Tax Administration Division