Are chemical sanitizers used to clean food-processing equipment and processing-area floors/walls exempt from Texas sales tax?

Plain-English summary

A dairy processing and manufacturing facility asked whether the chemical sanitizers it's legally required to use -- to keep processing equipment and processing-room floors and walls clean and sterile -- are exempt from Texas sales tax. The Comptroller said yes: chemicals required by state or federal law and used on processing equipment or within the actual manufacturing/processing area qualify for the manufacturing exemption under Tax Code § 151.318(a)(10), which exempts property that's "necessary and essential to comply with federal, state, or local laws or rules that establish requirements related to public health."

The key facts driving the exemption were that (1) the sanitizers were legally mandated (not just a business choice) and (2) they were used on equipment or within the processing area itself -- not in some unrelated part of the facility.

What this means for you

Food and meat processors/manufacturers

If a law or regulation requires you to sanitize your equipment or processing area for food-safety reasons, the chemicals you use to do that can qualify as exempt manufacturing supplies -- but the exemption turns on the legal-requirement and processing-area conditions, so document both.

Businesses with sanitizing needs outside the processing area

This letter's holding is specific to processing equipment and the processing area itself (including its floors and walls). Sanitizers used elsewhere in a facility (offices, break rooms, general warehouse space unrelated to processing) wouldn't fall under this same reasoning.

Accountants and tax professionals

The controlling test is Tex. Tax Code § 151.318(a)(10): property used or consumed in actual manufacturing/processing that's necessary and essential to comply with public-health laws or rules. Confirm both the legal mandate and the processing-area nexus before claiming this exemption.

Common questions

Q: Are cleaning chemicals in a food plant always exempt from Texas sales tax?
A: Not automatically -- this letter's exemption applies to chemicals required by law and used on processing equipment or within the actual processing area. General-purpose cleaning outside that context isn't addressed by this ruling.

Q: What Texas Tax Code provision covers this exemption?
A: Tex. Tax Code § 151.318(a)(10), which exempts property necessary and essential to comply with public-health-related laws or rules in the actual manufacturing/processing operation.

Q: Does it matter whether the sanitizer is applied to equipment versus floors/walls?
A: Not per this letter -- both are exempt as long as they're within the actual manufacturing/processing area and the sanitizing is legally required.

Citations and references

Statutes:

• Tex. Tax Code § 151.318(a)(10) (public-health-compliance manufacturing exemption)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9912922L

Original ruling text

December 3, 1999

Subject: (no subject)

Thank you for your recent e-mail.

DAIRY, located at **, **, Texas, is a dairy processing
and manufacturing facility. Your facility produces both fluid milk products
and cultured dairy items. In order to maintain a clean and sterile
food-processing environment, DAIRY must use chemical sanitizers to clean our
processing equipment and processing room floors and walls. The use of chemical
sanitizers to maintain a sterile food processing environment is required by
both state and federal regulations. You ask if the chemical sanitizers applied
directly to processing equipment exempt from sales tax? Are the chemical
sanitizers applied to processing room floors and walls exempt from sales tax?

Response. The chemicals required by law and used on processing equipment and
in the actual manufacturing/processing area qualify for exemption. Texas Tax
Code 151.318 (a)(10) exempts "tangible personal property used or consumed in
the actual manufacturing, processing, or fabrication of tangible personal
property for ultimate sale if the use or consumption of the property is
necessary and essential to comply with federal, state, or local laws or rules
that establish requirements related to public health."

Several publications and other items of interest (including the Texas Tax Code)
are also available on our web page http://www.window.state.tx.us/.

Sales tax rules are available at
http://www.window.state.tx.us/taxinfo/rulendx/rulelist3.html#sst.

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]