Is a water softener used to condition water for a newspaper printing press exempt from Texas sales/use tax as manufacturing equipment?

Plain-English summary

A newspaper publisher asked the Comptroller whether a water softener used to soften water for its printing press was exempt from Texas sales/use tax as manufacturing equipment. The company explained that the softened water is necessary and essential to the printing process in two ways: some water fills in the blank areas of the printing plate to separate the ink (without it, the page would print solid black), and the rest is used on the press's water form rollers, where unsoftened (hard) water doesn't distribute evenly. Before installing the softener, the company had been treating tap water with chemicals instead.

The Comptroller drew a distinction between the chemicals and the softener (equipment) itself. The chemicals previously used to treat the water are exempt, because they are necessary and essential materials consumed directly in the manufacturing process. But the water softener — the equipment that conditions the water — is taxable, because the Comptroller viewed it as "one step removed" from directly manufacturing the newspaper. In other words, the softener doesn't itself act on the newsprint or ink; it merely prepares an input (water) that is then used directly in printing, and that extra step takes it outside the manufacturing exemption.

What this means for you

Newspaper printers and other manufacturers using treated water

If your manufacturing process depends on treated or conditioned water (e.g., softened, filtered, or purified), don't assume the equipment that treats the water automatically qualifies for the manufacturing exemption just because the water itself is essential. Under this ruling, consumable chemicals used directly in treating water used in the process can be exempt, while the capital equipment that performs the treatment (like a water softener) can still be taxable.

Accountants and tax professionals

This letter illustrates the Comptroller's "one step removed" test for the Texas manufacturing exemption: equipment that supports or prepares an input used in manufacturing is not automatically treated the same as the input itself. Materials consumed directly in the process (like water-treatment chemicals) can be exempt even when the equipment used for the same underlying function (conditioning the water) is not.

If you already installed similar equipment

This opinion is based on the specific facts presented to the Comptroller, and different facts could produce a different result. If you have a similar setup, consider requesting your own letter ruling rather than relying on this one, since STAR letters can only be relied upon by the taxpayer to whom they were issued.

Common questions

Q: Is a water softener used in a manufacturing process exempt from Texas sales/use tax?
A: Not necessarily. In this ruling, the water softener used to condition water for a newspaper printing press was found taxable because it is one step removed from directly manufacturing the newspaper.

Q: Were the chemicals used to treat the water exempt?
A: Yes. The chemicals previously used to treat the water were exempt as necessary and essential materials used during the manufacturing process.

Q: Why does the softener get treated differently from the chemicals?
A: The Comptroller viewed the chemicals as materials consumed directly in the manufacturing process, while the softener is equipment that is one step removed from directly manufacturing the newspaper — a distinction between direct-use materials and supporting equipment.

Q: Does it matter that the printing press "cannot function" without the softened water?
A: The letter acknowledges the water is necessary and essential to the process, but that alone didn't make the softener itself exempt equipment — the "one step removed" reasoning still applied.

Q: Can another business rely on this letter for its own equipment?
A: No. The opinion is based on the facts presented, and if the facts are different, the opinion may change. Only the taxpayer to whom the letter was issued may rely on it directly.

Citations and references

No specific statutes or rule numbers were cited 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/9605L1414A12

Original ruling text

May 31, 1996

Dear ***:

I am responding to your letter questioning the taxability of a water softener
used to soften water that is necessary and essential to the manufacturing of
the newspaper. You stated the printing press cannot function without the water.

You explained some of the water is used to fill in the blank parts of the plate
to separate the ink. This creates the print on the newsprint; without the water
the result would be totally black paper. The remaining water is used with the
water form rollers on the press. Without softening, the water is hard and does
not distribute evenly. Before obtaining the water softener, the water was taken
from the tap, treated with chemicals, and then used.

The chemicals are exempt as necessary and essential materials used during the
manufacturing process. The water softener (equipment) is not used directly in
manufacturing the newspaper; it is one step removed. Therefore, the water
softener is taxable.

This opinion is based upon the facts presented. If there are additional or
different facts, this opinion may change. If you have other questions or require
additional information, you may write to Tax Policy Division, Comptroller of Public
Accounts.

Sincerely,

Tax Policy Division

NOTE: Previous Accession Number 9605478L