Do xerox-type copying machines used to sell copies as part of a commercial printing business qualify for Texas's manufacturing equipment exemption, and does it matter if the machines are acquired through a lease-purchase arrangement?

Plain-English summary

A commercial printer who sells copies reproduced on xerox-type copiers asked for written confirmation of two things discussed in a prior phone call: whether these copying machines qualify for Texas's manufacturing exemption, and whether that exemption still applies if the machines are acquired through a lease-purchase arrangement rather than bought outright.

The Comptroller confirmed yes to both. The copying machines qualify as manufacturing equipment because they're used to produce the copies the business sells — the same manufacturing-equipment logic that applies to other production equipment used to make a product for sale. And the exemption isn't limited to machines the business owns outright: it extends to leased equipment too, as long as the lease agreement runs for at least a year. In that case, the business issues an exemption certificate to the lessor/seller to claim the exemption on the lease payments, just as it would on a purchase.

What this means for you

Commercial printers and copy shops

Copying machines used to produce copies you sell as part of your printing business qualify for the manufacturing equipment exemption — the same as other production machinery.

Businesses acquiring manufacturing equipment through leases rather than purchases

The manufacturing exemption isn't limited to outright purchases. If you lease equipment used in manufacturing/production for at least a year, you can issue an exemption certificate to the lessor and claim the same exemption you'd get on a purchase.

Accountants and tax professionals

This letter is a simple, useful confirmation that (1) production-use copying equipment counts as manufacturing equipment in a commercial printing context, and (2) the one-year-minimum-lease-term rule is what determines whether leased equipment can carry the manufacturing exemption via exemption certificate.

Common questions

Q: Do copying machines used to produce copies for sale qualify for the Texas manufacturing exemption?
A: Yes, when used as part of a commercial printing business to produce copies that are sold.

Q: Does the exemption still apply if the machines are leased instead of purchased?
A: Yes, as long as the lease agreement is for at least a year — the business can issue an exemption certificate to the lessor/seller to claim it.

Q: Can I rely on this letter for my own printing/copying equipment?
A: No. This opinion is based on the facts presented, and additional or different facts may change the result; it binds the Comptroller only as to the taxpayer it was issued to.

Citations and references

• No specific Tax Code section or Comptroller rule number is cited in the body of this letter; it applies the Comptroller's general manufacturing equipment exemption framework, including its extension to equipment leased for at least one year.

Subject

Copying Machine — Used In Photocopying/Printing Service — Qualifies As Manufacturing Equipment

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9801424L

Original ruling text

January 21, 1998

Dear Mr. **:

Thank you for asking for written confirmation of our telephone conversation
last week.

You explained that as part of your commercial printing business, you sell
copies reproduced by xerox type copiers.

Your asked whether such machines would qualify for the manufacturing exemption
and whether the exemption would apply if the machines were purchased by way of
a lease purchase arrangement.

The answer to both you questions is, yes. You may issue and exemption
certificate to the lessor/seller claiming the exemption certificate. The
manufacturing equipment extends to leased items provided the lease agreement is
for at least a year.

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