Could a company rebuilding purchased used core assemblies buy wrapping and packaging supplies tax-free as a manufacturer?

Plain-English summary

The company purchased used core assemblies, completely disassembled them, cleaned and inspected the parts, remachined them to original or new factory specifications, replaced parts as needed, reassembled and tested the assemblies, and placed qualifying products in finished-goods inventory for sale.

The Comptroller classified that operation as manufacturing. The company could buy wrapping and packaging supplies tax-free by giving suppliers an exemption certificate.

What this means for you

The company owned the used cores and rebuilt them into inventory for sale; the letter did not address a business merely repairing a customer's own equipment.

Common questions

Was the company a manufacturer? Yes. Could it buy packaging tax-free? Yes with an exemption certificate. What facts supported manufacturing? Complete disassembly, remachining, rebuilding, testing, and placement in finished-goods inventory.

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/9111L1139C11

Original ruling text

November 19, 1991

Dear **:

Thank you for your recent letter describing your remanufacturing
process and asking about the wrapping and packaging exemption.

I understand your remanufacturing process to operate as follows:

* purchases used core assemblies. ** takes the
core assemblies it has purchased, completely disassembles them,
clean, inspects, re-machines to original or new factory specifications,
reassembles, and test them. Parts are replaced as needed with new
parts. When the assemblies meet ** factory standards, the
assemblies are packaged and added to the finished goods inventory
for sale.

*** is a manufacturer and may purchase wrapping and
packaging supplies tax free by issuing an exemption certificate
in lieu of tax to suppliers.

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

If you have any questions or need more information, you may call
me toll free at 1- 800- 252-5555, extension 3-4633. The regular
number is 512/463-4633.

Sincerely,

Wanda Hutchenson
Tax Administrative Division