Floor Packet Page No. 279
      Amend CSHB 4 by striking page 239, line 25, through page 241,
line 20, and substituting:
      (a)  The following items are exempted from the taxes imposed
by this chapter:
            (1)  tangible personal property that will become an
ingredient or component part of tangible personal property
manufactured, processed, or fabricated for ultimate sale;
            (2)  tangible personal property directly used or
consumed in or during the actual manufacturing, processing, or
fabrication of tangible personal property for ultimate sale if the
use or consumption of the property is necessary or essential to the
manufacturing, processing, or fabrication operation and directly
makes or causes a chemical or physical change to:
                  (A)  the product being manufactured, processed,
or fabricated for ultimate sale; or
                  (B)  any intermediate or preliminary product that
will become an ingredient or component part of the product being
manufactured, processed, or fabricated for ultimate sale; <and>
            (3)  services performed directly on the product being
manufactured prior to its distribution for sale and for the purpose
of making the product more marketable; and
            (4)  actuators, steam production equipment and its
fuel, in-process flow through tanks, cooling towers, generators,
heat exchangers, electronic control room equipment, and
computerized control units that are used to power, supply, support,
or control equipment that qualifies for exemption under Subdivision
(2) or to generate electricity, chilled water, or steam for
ultimate sale.
      (c)  The exemption does not include:
            (1)  machinery, equipment, or replacement parts or
their accessories having a useful life when new in excess of six
months;
            (2)  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;
            (3)  maintenance or janitorial supplies or equipment
, or other machinery, equipment, materials, or supplies that are
used incidentally in a manufacturing, processing, or fabrication
operation;
            (4) <(3)>  hand tools; <or>
            (5) <(4)>  office equipment or supplies, equipment or
supplies used in sales or distribution activities, research or
development of new products, or transportation activities, or other
tangible personal property not used in an actual manufacturing,
processing, or fabrication operation;
            (6)  ice exclusively used by commercial fishing boats
in the storing of aquatic species including shrimp, other
crustaceans, finfish, mollusks, and other similar creatures; or
            (7)  machinery and equipment or supplies used to
maintain or store tangible personal property.
      (r)  A taxpayer claiming an exemption under this section has
the burden of proof that the exemption is applicable and that no
exclusion under Subsection (c) applies.