Does piping and conveyor equipment used to transport product in a Texas refinery or chemical plant still qualify for the manufacturing exemption after September 30, 1997?

Plain-English summary

A taxpayer asked about the manufacturing exemption for piping in chemical plants and refineries, effective after September 30, 1997. The Comptroller explained that H.B. 1855 clarified that piping and conveyors used to transport product do NOT qualify for the manufacturing exemption, on or after October 1, 1997.

This legislative change reversed two Texas court decisions — Tyler Pipe v. Sharp and Chevron Chemical v. Sharp — that had expanded the sales tax manufacturing exemption to cover this kind of transport piping. H.B. 1855 codifies the Comptroller's policy as it existed before those decisions. Critically, the new law is not retroactive: it does not affect the tax treatment of the types of items covered by Tyler Pipe and Chevron Chemical for periods before the bill's October 1, 1997 effective date.

What this means for you

Refineries and chemical plants

If you have transport piping or conveyors that qualified for the manufacturing exemption under the Tyler Pipe/Chevron Chemical line of cases, that exemption ends effective October 1, 1997 going forward — but any refund claims or exemption positions for pre-October-1997 periods are unaffected by H.B. 1855.

Accountants and tax professionals

When reviewing manufacturing-exemption positions for refinery/chemical-plant clients spanning 1997, split the analysis at October 1, 1997: pre-date, the expansive Tyler Pipe/Chevron Chemical reading may still apply; post-date, H.B. 1855's narrower rule controls for transport piping and conveyors.

Common questions

Q: Does transport piping at a refinery qualify for the manufacturing exemption today?
A: Not since October 1, 1997 — H.B. 1855 excluded piping/conveyors used to transport product from the exemption from that date forward.

Q: Does H.B. 1855 apply retroactively to periods before October 1, 1997?
A: No — the law explicitly does not affect the types of items addressed by Tyler Pipe v. Sharp and Chevron Chemical v. Sharp for periods preceding its effective date.

Q: Can another company rely on this exact letter?
A: No. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10); confirm your own facts with a tax professional.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9709492L

Original ruling text

September 29, 1997

Dear Mr. **:

Thank you for writing to ask about the exemption for piping in chemical plants
and refineries after September 30, 1997.

As we discussed over the telephone, HB 1855 made clear that piping and
conveyors used to transport the product do not qualify for the manufacturing
exemption on or after October, 1, 1997.

The new law effectively reverses two recent court decisions, Tyler Pipe v.
Sharp and Chevron Chemical v. Sharp, that resulted in an expansion of the sales
tax exemption for manufacturing equipment, and it codifies Comptroller policy
as it existed before those decisions.

However, the new law does not affect the types of items addressed by the Tyler
Pipe and Chevron cases for the periods preceding the effective date of the
bill.

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

You may call me toll free at 1-800-531-5441, ext. 3-4675. The direct line is
(512) 463-4675. You also may write to Tax Administration Division, Comptroller
of Public Accounts. My internet address is .

Sincerely,

Tom Soto
Tax Policy Division