A manufacturing facility that handles powder ingredients asked about the taxability of an equipment enhancement: silos, scale hoppers, filters/receivers, piping/fittings/valves, instrumentation, a motor control center, and a bag dump station with a convey air compressor. Which of these qualify for the manufacturing exemption?

Plain-English summary

A manufacturer expanding a facility that handles powder ingredients (mixed into products via mixers) asked the Comptroller to evaluate a list of equipment for the Texas manufacturing exemption. The Comptroller noted that for some items, it couldn't tell from the description alone whether the equipment directly changes the product or is used to measure precise recipe amounts — so the taxability is stated as conditional on that fact:

• Four silos — taxable. Used to store raw material (powder); storage equipment doesn't qualify.
• Four scale hoppers — exempt, but only if they actually measure the recipe amounts used in the mixers that make the product. Quality control equipment used during the manufacturing process qualifies for exemption.
• Eleven filters/receivers — taxable, unless they either directly cause a physical/chemical change to the product, or are used to measure precise recipe amounts for the mixers.
• Piping, fittings, and valves — taxable, treated as transportation equipment. (Note: piping/fittings that are genuine component parts of exempt manufacturing equipment, like the mixers themselves, are exempt.)
• Associated instrumentation — taxable, used in transportation.
• Motor Control Center and other electrical components powering the process — taxable if primarily used to power transportation equipment, rather than exempt manufacturing equipment like the mixers.
• Bag dump station, including the convey air compressor — taxable, used in transportation.

The throughline: storage and transportation equipment is taxable, no matter how integral it is to running the facility, while equipment that either directly transforms the product or performs a genuine quality control function (like precisely measuring ingredients going into the mixers) can qualify for exemption.

What this means for you

Manufacturers handling bulk powder/ingredient materials

Silos, general piping/fittings/instrumentation, and material-handling equipment like bag dump stations and convey compressors are taxable as storage/transportation equipment — don't assume they're exempt just because they're essential to your production line. Scale hoppers and similar measuring equipment can be exempt, but only when they're actually performing a quality-control/recipe-measurement function tied to making the product.

Businesses evaluating equipment purchases for manufacturing exemption certificates

Be precise about function when documenting exemption claims: "measures recipe amounts feeding the mixer" supports exemption, while "stores raw material" or "moves material between process steps" does not, even for otherwise similar-looking equipment.

Accountants and tax professionals

A useful multi-item worked example distinguishing exempt quality-control/direct-production-change equipment from taxable storage/transportation equipment in a bulk-materials manufacturing setting, including the component-part exception for piping actually built into exempt equipment like mixers.

Common questions

Q: Are storage silos for raw manufacturing material exempt from Texas sales tax?
A: No — storage equipment is taxable.

Q: Are scale hoppers used in a manufacturing process exempt?
A: Only if they actually measure the recipe amounts used in the mixers that make the product -- a quality control function.

Q: Is piping used to move material between processing steps exempt?
A: No, it's taxable as transportation equipment, unless it's a genuine component part of exempt equipment like the mixers themselves.

Q: Can I rely on this letter for my own facility's equipment purchases?
A: No. It's based on the specific facts presented and can be relied on only by the taxpayer to whom it was issued; additional or different facts may yield different results.

Citations and references

No specific Tax Code section or numbered Comptroller rule is quoted in the body of this letter; the answer applies the general manufacturing-exemption distinction between equipment causing a direct physical/chemical change or performing quality control, versus equipment used in storage or transportation.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9907557L

Original ruling text

July 8, 1999

Dear Mr. **:

Thank you for your recent letter regarding enhancement of your manufacturing
facility and Texas sales tax exemptions for manufacturing equipment.

I have addressed the taxability of each of the items in your letter. In some
cases, I could not determine whether the items directly make or cause a
chemical or physical change to the product or are used to measure out the
precise amounts of powder in the recipe for the mixers. I have explained the
taxability dependent on those circumstances. Equipment used in storage or
transportation activities is not exempt.

Four Silos- Taxable. Used in storage of raw material (powder).

Four scale hoppers- Exempt if the scale hoppers actually measure the recipe
amounts used in the mixers that make the product. Quality control equipment
used during the manufacturing process qualifies for exemption.

Eleven filters/receivers- Taxable unless the filter/receivers either directly
make or cause a physical or chemical change to the product or are used to
measure out the precise amounts of powder in the recipe for the mixers.

Associated piping, fittings and valves- Taxable. Used in transportation.
Note: Component parts of exempt manufacturing equipment, such as the mixers,
are exempt.

Associated instrumentation- Taxable. Used in transportation.

Motor Control Center and other electrical components to power the process-
Taxable if primarily used for powering transportation equipment rather than
exempt manufacturing equipment such as the mixers.

Separate bag dump station including convey air compressor- Taxable. Used in
transportation.

This opinion is based on the facts presented. Additional or different facts
may yield different results.

You may call me toll free 1-800-531-5441, extension 5-9787, if you have any
questions or need more information. The direct line is 512/305-9787. You may
also write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Philip Knisely
Tax Policy Division