A customer gave a seller of cut limestone an exemption certificate claiming the limestone is exempt 'unprocessed material, merely sorted, sized, screened, washed or dried.' Can the seller accept that certificate in good faith?

Plain-English summary

A seller of cut limestone had received an exemption certificate from a customer claiming the limestone was exempt as "unprocessed materials, merely sorted, sized, screened, washed or dried." The seller asked the Comptroller whether it could accept that certificate in good faith.

The Comptroller said no, confirming a position it had previously discussed directly with this taxpayer: cut limestone is "processed material," not unprocessed material, and is therefore taxable. Cutting rock into different sized pieces goes beyond the narrow list of operations (sorting, sizing, screening, washing, or drying) that keep a material in its "unprocessed" — and therefore potentially exempt — category. The letter also references an earlier, separately published edited letter ruling (STAR fiche # 8809L0913F12) addressing the same cut-limestone taxability question, showing this was a settled, previously-litigated position rather than a new one.

What this means for you

Quarries, stone yards, and rock/aggregate sellers

Don't accept a customer's exemption certificate premised on rock or stone being "unprocessed" if you've cut it into sized pieces. Cutting crosses the line from the narrow unprocessed-material category (sorting, sizing, screening, washing, drying only) into taxable processed material.

Buyers of cut stone/limestone products

If you're claiming an "unprocessed materials" exemption on limestone or similar rock products, confirm the specific processing your supplier performed. Cutting into different sized pieces will not qualify, regardless of how the product is marketed.

Accountants and tax professionals

This letter draws a clean, bright-line distinction for aggregate/stone materials: sorting, sizing (by natural grading), screening, washing, and drying keep material "unprocessed," but cutting takes it out of that category and into taxable "processed material."

Common questions

Q: Is cut limestone considered "unprocessed material" (merely sorted, sized, screened, washed, or dried) for Texas sales tax purposes?
A: No — the Comptroller treats cut limestone as processed material, which is taxable.

Q: Can a seller accept an exemption certificate claiming cut limestone is unprocessed material?
A: No — sellers should not accept such a certificate, per this letter.

Q: Is there other Comptroller guidance on this same question?
A: Yes — the letter references a separate, previously published edited letter ruling (STAR fiche # 8809L0913F12) addressing cut limestone's taxability.

Q: Can I rely on this letter for my own rock/stone products?
A: No. It's based on the facts presented, and the letter notes other facts, though similar, may provide a different result.

Citations and references

No specific Tax Code section or rule number was cited in this letter; it confirms the Comptroller's settled classification of cut limestone as taxable processed material (see also STAR fiche # 8809L0913F12, referenced in the original text, for the fuller analysis).

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9804290L

Original ruling text

April 20, 1998

Dear **:

This is in response to your request for a ruling on whether you can make a good
faith acceptance of an exemption certificate provided to you by **.
The certificate is claiming an exemption for cut limestone on the basis that
it qualifies as "unprocessed materials, merely sorted, sized, screened, washed
or dried."

Response: As we had previously discussed, our office considers cut limestone
to be "processed material" and is therefore taxable. You should not accept an
exemption certificate from a customer on the basis that cut limestone is
"unprocessed material."

I am enclosing an edited letter ruling (fiche # 8809L0913F12) that addresses
the taxability of cut limestone.

This opinion is based on the facts presented. Other facts though similar may
provide a different result.

I hope this information answers your questions. If you need additional
information, please call me toll-free at 1-800-531-5441, extension 3-4502. The
direct line is 512/463-4502. You may also write to Tax Policy Division,
Comptroller of Public Accounts. You may also e-mail our tax help section at:

Sincerely,

Gilbert Zamora
Tax Policy Division