Does the manufacturing exemption apply to light bulbs used in a machine that sorts rice kernels before they are ground into flour?

Plain-English summary

A taxpayer asked the Comptroller's office about the tax treatment of light bulbs used to illuminate production areas, including light bulbs inside a sorting machine. The sorting machine separates and selects broken rice pieces before they are ground into flour.

The Tax Policy Committee considered the issue and found that the light bulbs do not qualify for the manufacturing exemption. The Comptroller explained that light bulbs in the sorting machine are not qualified for the exemption because the act of sorting raw materials prior to grinding is not itself a manufacturing function. The letter points to subsection (a)(9) of Rule 3.300 (enclosed with the original letter but not reproduced in the text) as the basis for this distinction.

What this means for you

Rice millers and other food processors

If your production process includes a step where raw materials are sorted, screened, or selected before the actual manufacturing step (such as grinding), be aware that equipment used only for that pre-manufacturing sorting step — including lighting for that equipment — may not qualify for the manufacturing exemption, even though it precedes and supports a qualifying manufacturing process.

Businesses claiming the manufacturing exemption on lighting or equipment

This letter is a reminder that the manufacturing exemption turns on whether specific equipment is used in an actual manufacturing function. Equipment tied to sorting or otherwise preparing raw materials before manufacturing begins is treated differently from equipment used in the manufacturing process itself.

Common questions

Q: Does the manufacturing exemption cover light bulbs that illuminate production areas generally?
A: Not according to this letter. The Comptroller found that light bulbs used to illuminate production areas did not qualify for the manufacturing exemption.

Q: What about light bulbs inside equipment that sorts materials before grinding?
A: Also not exempt. The letter states that light bulbs in a sorting machine used to separate and select broken pieces to be ground into flour are not qualified for the manufacturing exemption because sorting raw materials prior to grinding is not a manufacturing function.

Q: Where does the Comptroller's reasoning come from?
A: The letter refers to subsection (a)(9) of the enclosed Rule 3.300, though the rule text itself is not reproduced in this letter.

Citations and references

No specific statutes are cited in the text of this letter; it references subsection (a)(9) of Comptroller Rule 3.300, which was enclosed with the original letter but not reproduced in the scraped text.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9411L1324G01

Original ruling text

November 21, 1994

Dear **:

Thank you for your recent letter regarding the tax treatment of
light bulbs used to illuminate production areas.

I am told that this issue was discussed by the Tax Policy Committee
and found not to qualify for the manufacturing exemption.

Light bulbs in a sorting machine to separate and select broken
pieces to be ground into flour are also not qualified for the manufacturing
exemption. The act of sorting raw materials prior to grinding is not a
manufacturing function. Please refer to subsection (a)(9) of the enclosed Rule
3.300.

This opinion is rendered based on the facts you submitted. Other
facts, though similar, may yield different results.

You may call me toll free at 1-800-531-5441, ext. 3-4680. The
direct line is 512/463-4680. You may also write to Tax Administration,
Comptroller of Public Accounts.

Sincerely,

Al Van Allen
Tax Administration Division

NOTE: Previous Accession Number 9411717L