Sales Tax Articles
Sales Tax State Activity Update - September 2006
Lone Star State Examines Lone Components in Manufacturing
The Texas Comptroller of Public Accounts recently denied a claim for refund of use tax paid on manufacturing equipment and services to repair the equipment due to lack of evidence substantiating its exempt use.
The claimant purchased chromatographs, water tanks, pipe bends, degasser parts and repairs to induction motors for pumps that circulate water through cooling towers. The refund of tax on the chromatographs was permitted because the tanks were installed pursuant to a lump sum contract for new construction, a non-taxable transaction.
The claimant could not classify water tanks as an apparatus, device or machine to qualify as "equipment" for purposes of the exemption. There was no evidence to support that pipe bends or secondary degassers were used in the manufacturing process to qualify for the exemption.
The claimant established pumps as "component parts" of the cooling towers. The cooling towers were exempt, but claimant did not establish that pumps and cooling towers work together as a single piece of equipment to qualify for the exemption. Therefore, the refund for tax paid on repairs to induction motors for the pumps was denied.
The full text may be accessed on the Texas State Tax Automated Research System.
(Texas Comptroller of Public Accounts Hearing No. 43,982, 6/30/06)
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