Is an air compressor that powers pneumatic tools exempt from Texas sales tax under the manufacturing exemption?

Subject

Equipment — Used To Power, Supply, Support, Or Control Manufacturing Machine Or Equipment — Qualifies For Manufacturing Exemption

Plain-English summary

A business asked whether an air compressor used to power its manufacturing equipment qualifies for the Texas manufacturing sales tax exemption. In a follow-up phone call, the taxpayer confirmed that the "manufacturing equipment" being powered was pneumatic tools.

The Comptroller's answer: the air compressor qualifies for the manufacturing exemption if the pneumatic tools it powers are themselves used for assembly or to repair tangible personal property that will ultimately be sold. In other words, equipment that powers, supplies, supports, or controls other manufacturing equipment can be exempt too, but its exempt status rides on how the equipment it serves is actually used. The letter notes the opinion is based on the facts presented and could change if the facts are different.

What this means for you

Manufacturers and fabricators using pneumatic tools

If you run an air compressor to power pneumatic tools used for assembling or repairing goods you intend to sell, the compressor itself can qualify for the manufacturing exemption alongside the tools -- you don't have to prove the compressor "manufactures" anything on its own, because it supports equipment that does.

Businesses using pneumatic tools for other purposes

If the pneumatic tools are used for something other than assembly or repair of property for ultimate sale (for example, general maintenance, or work on property not intended for sale), this letter's reasoning would not extend the exemption to the air compressor.

Accountants and tax professionals

This letter illustrates the "power, supply, support, or control" doctrine under the manufacturing exemption: ancillary equipment (like a compressor) can be exempt because of what it enables, but only where the underlying tool or machine it drives independently qualifies for the exemption.

Common questions

Q: Does an air compressor automatically qualify for the manufacturing exemption?
A: No. Per this letter, it qualifies only if it powers equipment (here, pneumatic tools) that is itself used for assembly or repair of tangible personal property for ultimate sale.

Q: What if the pneumatic tools are used for something other than assembly or repair for sale?
A: The letter implies the exemption would not apply in that case, since the compressor's exempt status depends on the tools' qualifying use.

Citations and references

No specific statutes or rules were cited by name in this letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9604L1408F13

Original ruling text

April 4, 1996

Dear ****:

In your letter, you asked if an air compressor used to power
manufacturing equipment qualifies for the manufacturing exemption. In
a telephone conversation, you confirmed the manufacturing equipment is
pneumatic tools.

The air compressor qualifies for the manufacturing exemption if the
pneumatic tools are used for assembly or to repair tangible personal
property for ultimate sale.

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

You may call me toll free at 1-800-531-5441 extension 50892. The direct
line is 512/475-0892. You may also write to Tax Policy Division,
Comptroller of Public Accounts.

Sincerely,

John J. Fitzgibbons, CPA
Tax Policy

NOTE: Previous Accession Number 9604180L