At an iron-casting foundry, is the hoist/trolley system moving castings into a blast-cleaning machine taxable, and are hoists used to manipulate castings during grinding exempt?

Plain-English summary

A manufacturer of ductile and gray iron castings, undergoing a direct-pay-permit audit, asked the Comptroller to determine the taxability of two pieces of foundry equipment.

Scenario 1 — hoist/trolley system into the blast-cleaning machine. Large castings (up to 60" diameter x 72" high, 2,000 lbs.) are lifted by a 5-ton hoist onto a spinner-shaft hook, then manually pushed along a rail trolley (extending 20-30 feet) into a blast machine that strips flashing, scale, and residual sand with abrasive steel shot. The Comptroller found this hoist/trolley system is taxable intraplant transportation equipment under § 151.318(c)(1), which specifically excludes intraplant transportation equipment — including "all piping and conveyor systems" — from the manufacturing exemption, even when it's used to move product/raw material in connection with manufacturing. The letter flagged two possible exceptions worth checking: systems that are part of a single item of manufacturing machinery, or purchases made before October 1, 1997 that are part of a continuous integrated manufacturing process.

Scenario 2 — hoists manipulating castings during grinding/finishing. After blasting, castings go to grinding stations where a hoist is used to raise/lower/manipulate the casting so the grinder can access all surfaces. Applying the same intraplant-transportation-equipment analysis, this manipulation hoist is likewise taxable — except for a grandfather clause: for purchases made before October 1, 1997, the manipulating hoist or crane that positioned and held the casting during the grinding process qualified for exemption. Equipment purchased on or after that date does not get this grandfathered treatment.

What this means for you

Foundries and heavy-manufacturing operations with hoist/conveyor systems

Hoists, trolleys, conveyors, and piping that move parts between stations in your plant are generally taxable "intraplant transportation equipment" under § 151.318(c)(1), even though they're integral to your manufacturing process — this is one of the manufacturing exemption's clearest carve-outs. Check the purchase date on any manipulation hoists/cranes still in service: equipment bought before October 1, 1997 may retain grandfathered exempt status that a same-function replacement bought today would not have.

Businesses undergoing a direct-pay-permit audit

This letter shows the kind of item-by-item, equipment-specific determination an auditor may ask you to seek — get a written ruling on ambiguous equipment categories (like hoists that both transport AND manipulate parts) rather than assuming exemption or taxability by analogy.

Accountants and tax professionals

Flag the October 1, 1997 date as a hard line for any manufacturing client with older material-handling equipment still in service — the same category of equipment can be exempt or taxable purely based on purchase date, independent of its current function.

Common questions

Q: Are hoists and trolleys that move parts through a manufacturing plant exempt as manufacturing equipment?
A: No — generally, intraplant transportation equipment (including piping and conveyor systems) is specifically excluded from the manufacturing exemption under Sec. 151.318(c)(1), even when it's essential to the manufacturing process.

Q: Is there any exception for older equipment?
A: Yes — a manipulating hoist or crane that positioned and held a part during the manufacturing process qualified for exemption if purchased before October 1, 1997.

Q: Does a hoist used to manipulate a part during grinding count the same as a transport hoist?
A: Under this letter's analysis, yes, for purchases on or after October 1, 1997 — both are taxable intraplant transportation/handling equipment, subject to the same pre-1997 grandfather exception.

Q: Can another foundry or manufacturer rely on this letter?
A: Only the taxpayer who requested it can use it for detrimental reliance, and the Comptroller notes two specific exceptions (single-item-of-machinery, and the 1997 grandfather clause) that depend on facts this taxpayer would need to supply separately.

Citations and references

Statutes:

• Tex. Tax Code § 151.318(c)(1) — manufacturing exemption excludes intraplant transportation equipment, including piping and conveyor systems used to move product/raw material

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9910826L

Original ruling text

October 25, 1999

Subject: Taxability Determination Request

Thank you for your recent e-mail in regard to manufacturing exemptions.

You are currently undergoing a direct pay permit audit in which your auditor,
** from the ** office, has requested you ask for a
determination of taxability on equipment used in your manufacturing process.

** is a manufacturer of ductile and gray iron castings, which are
used in many industrial applications. The equipment in question is designed to
clean, or blast, the castings once they have been manufactured. The blast
machine uses three (3) centrifugal blast wheels that throw abrasive steel shot,
which strips the casting of any flashing, scale, or residual sand that may
still remain on the casting's surface.

Scenario 1: These castings, which can reach sizes of 60" diameter x 72" high
and weigh 2,000 lbs., enter the blast machine by way of a hoist/trolley loop
system. The castings are lifted via a 5-ton hoist into a spinner shaft hook.
They are then manually pushed along a rail trolley into the blast machine
cabinet. Several parts can be staged" awaiting entry into the blast machine as
the rail system extends approximately 20-30 feet from the blast machine doors.
The same rail holds castings that have already been blasted until they can be
unloaded.

Question: Is the hoist/trolley system that is used to get the castings into the
blast machine taxable?

Response. These items are intraplant transportation equipment. As such, they
are taxable per Texas Tax Code 151.318(c)(1) which states

(c) The exemption does not include:

(1) intraplant transportation equipment, including intraplant transportation
equipment used to move a product or raw material in connection with the
manufacturing process and specifically including all piping and conveyor
systems...

Please note that there are exceptions for systems that are a part of a single
item of manufacturing machinery and for purchases prior to October 1, 1997 that
are part of a continuous integrated manufacturing process. You may wish to
provide additional information if either of these situations are applicable.

Scenario 2: Once these castings have been blasted they are then transferred to
one of several grinding stations where the surface is inspected. Further
grinding may take place if deemed necessary or if the casting's configuration
did not allow adequate exposure to surfaces requiring blasting during the
process described in Scenario 1 above. Due to the large nature of these parts,
the grinding operator uses a hoist to manipulate the casting in order to get to
areas that need further grinding. This manipulation includes raising or
lowering the casting thereby allowing the grinder easier access to all
surfaces.

Question: Are the hoists that are used to manipulate the casting during the
grinding and finishing process exempt from tax?

Response. See first response. For purchases prior to October 1, 1997, the
manipulating hoist or crane that positioned and held the casting during the
process qualified for exemption.

Several publications and other items of interest (including the Texas Tax Code)
are also available on our web page .

Sales tax rules are available on the Internet
.

This opinion is based on the facts presented. Different facts though similar,
may result in different answers.

If you have any questions or need more information, you may call me toll free
at 1-800-531-5441, extension 5-0613. You may also write to Tax Policy
Division, Comptroller of Public Accounts, Post Office Box 13528, Austin, Texas
78711.

Kevin Koller
[email protected]