Is a manufacturer's purchase of reusable wood/metal shipping containers, plus the rings and fixtures used to secure product inside them, tax-exempt if the containers are returned and reused to move product between the manufacturer's own facilities? Is repair work on those containers exempt too?

Plain-English summary

An aerospace-product manufacturer receives unfinished products at one plant, adds wiring and sound-deadening material, tests and paints them, then ships them to a sister plant for further processing. It uses reusable wood or metal shipping containers, plus shipping rings/fixtures bolted to both the product and the container to secure it in place, and it also pays to have the containers repaired to keep them in service. The manufacturer asked whether these purchases are tax-free since the containers are returned and reused rather than sold along with the product to an outside customer.

The answer is no. Sales tax is due on the shipping containers, rings, and fixtures used to move the product between the manufacturer's OWN facilities, and sales tax is also due on repair charges for those items. No exemption applies. The letter is brief and doesn't spell out its reasoning in detail, but the result reflects a general principle: packaging/container exemptions in Texas typically require that the container actually be transferred to a customer as part of a sale of the product inside it (so the container becomes part of what the customer buys) — reusable internal shipping containers moving product between a company's own plants, with no sale to an outside party, don't qualify.

What this means for you

Manufacturers with multi-plant operations

If you ship in-process or unfinished products between your own facilities using reusable containers, racks, rings, or fixtures, don't assume those purchases (or their repairs) are tax-exempt just because the container never leaves your company's possession and gets reused. This letter treats them as ordinary taxable purchases.

Accountants and tax professionals

This is a useful data point on the packaging/container exemption boundary: internal, company-to-company-facility shipping materials that are never conveyed to an outside customer are taxable, unlike containers that get sold along with a product to an end customer.

Common questions

Q: We ship unfinished parts between our own plants in reusable containers — is that tax-exempt?
A: Not under this letter. Sales tax applies to the containers, rings, and fixtures themselves, and to repairs performed on them, when they're used to move product between a manufacturer's own facilities.

Q: Does it matter that the containers are returned and reused rather than consumed?
A: No — the letter states plainly that no exemption applies to these purchases despite the containers being returned and reused.

Q: Would the answer differ if the container were shipped out to an actual customer along with the product?
A: This letter doesn't address that scenario; it only rules on containers used for internal transport between the taxpayer's own facilities. A different fact pattern (packaging sold to an outside customer) would need its own analysis.

Citations and references

• No specific Tax Code section or Comptroller rule number is cited in the body of this letter; it states the taxability result directly without naming a supporting statute or rule.

Subject

Wood/Metal Containers With Rings And Fixtures — Used By Manufacturer To Transport Products Between Facilities

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9711062L

Original ruling text

November 20, 1997

Dear **:

Thank you for your recent letter which is restated in part with response below.

Client is a manufacturer of an aerospace product. The products at the plant in
question are received in an unfinished condition. The products are enhanced by
adding electrical wiring and sound deadening material. Additionally, the
products are tested and painted before being transported to a sister plant for
further processing. Wood or metal shipping containers are used to transport
the product. Client also purchases shipping rings or shipping fixtures
utilized in transporting the product. The shipping rings or fixtures are
attached to the product before it is placed in the container. The shipping
ring or fixture is then bolted to the container to secure the product in place.
The shipping container, rings, and fixtures are returned and reused by Client.
In addition to purchasing the shipping containers, work to repair the
containers is performed to maintain the shipping containers.

Is the purchase of the shipping containers, shipping rings, and shipping
fixtures tax free if they are returned to the plant? Is repair work performed
on the containers tax free?

Response: Sales tax is due on charges for the shipping containers, shipping
rings, and shipping fixtures used to transport items between taxpayer's
facilities. Sales tax is also due on charges for repairs performed on these
items. No exemption applies to these purchases.

This opinion is rendered based on 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, ext. 3-4680. The direct line is
512/463-4680. You may also write to Tax Policy, Comptroller of Public
Accounts. The email address is .

Sincerely,

Al Van Allen
Tax Policy Division