Ezel / Tax Rulings / TX
TX 9605L1414A13 Sales and/or Use Tax (State,Local,MTA) 1996-05-30

Does a raw water sand filter system that treats water used to cool machinery and equipment in a manufacturing process qualify for Texas's manufacturing exemption?

Short answer: No. The raw water sand filter project does not qualify for the manufacturing exemption because the water it treats is not used in processing tangible personal property for sale — it's used to keep the machinery and equipment cool.

Apply this to your situation

This page answers the general question as of 1996. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1996
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

A taxpayer asked the Comptroller's office whether a raw water sand filter project would qualify for Texas's manufacturing exemption. The system was designed to treat raw water so it could be used to cool machinery and equipment in a manufacturing process, removing suspended solids and iron to meet potable turbidity specifications.

The Comptroller ruled that the project does not qualify for the manufacturing exemption. The reasoning was narrow and specific: the manufacturing exemption applies to items used in the actual processing of tangible personal property for sale, and this filtered water was not used that way — it was used to keep machinery and equipment cool, which the Comptroller treated as a different, non-qualifying function.

What this means for you

Manufacturers with cooling systems for equipment

If your facility uses water treatment or filtration equipment solely to keep machinery and equipment cool — rather than as an input that is directly incorporated into or used to process the tangible personal property you're manufacturing for sale — don't assume it qualifies for the manufacturing exemption. This ruling shows the Comptroller draws a line between water used in processing the product itself and water used to support/cool the equipment that does the processing.

Accountants and tax professionals

This letter is a useful, narrow data point on how the Comptroller applies the manufacturing exemption to ancillary equipment (like water treatment/cooling systems) versus equipment or materials that directly process the product. The letter doesn't cite specific statutes or rules, and it's expressly limited to the facts presented — different facts could change the outcome.

Common questions

Q: Does a raw water sand filter system that cools manufacturing machinery qualify for the Texas manufacturing exemption?
A: No. The Comptroller ruled it does not qualify because the treated water is used to cool machinery and equipment, not to process tangible personal property for sale.

Q: Why did the water's use in cooling matter to the outcome?
A: The manufacturing exemption is tied to items used in processing tangible personal property for sale. Water used only to keep machinery/equipment cool doesn't meet that standard, according to this ruling.

Q: What did the filter system actually do?
A: It treated raw water by removing suspended solids and iron to meet potable turbidity specifications, so the water could be used to cool machinery and equipment in the manufacturing process.

Q: Can I rely on this letter for my own water treatment or cooling equipment?
A: No. The letter states the opinion is based on the facts presented, and if there are additional or different facts, the opinion may change. STAR letters can generally only be relied on by the taxpayer to whom they were issued.

Citations and references

No specific statutes or rule numbers were cited in this letter.

Source

Original ruling text

May 30, 1996

Dear ****:

In your letter, you asked about the taxability of a raw water sand filter
project that will treat raw water to cool machinery and equipment used in
the manufacturing process. The system removes suspended solids and iron
to meet potable turbidity specifications.

The raw water sand filter project does not qualify for the manufacturing
exemption. The water is not used in the processing of tangible personal
property for sale, but is used to keep the machinery and equipment cool.

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 9605295L

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