By Eiland H.B. No. 1855
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to sales tax exemption for items used in manufacturing
1-3 tangible personal property for ultimate sale.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Section 151.318, Tax Code, is amended by amending
1-6 Subsections (a) and (c) and adding Subsections (r) and (s) to read
1-7 as follows:
1-8 (a) The following items are exempted from the taxes imposed
1-9 by this chapter:
1-10 (1) tangible personal property that will become an
1-11 ingredient or component part of tangible personal property
1-12 manufactured, processed, or fabricated for ultimate sale;
1-13 (2) tangible personal property directly used or
1-14 consumed in or during the actual manufacturing, processing, or
1-15 fabrication of tangible personal property for ultimate sale if the
1-16 use or consumption of the property is necessary or essential to the
1-17 manufacturing, processing, or fabrication operation and directly
1-18 makes or causes a chemical or physical change to:
1-19 (A) the product being manufactured, processed,
1-20 or fabricated for ultimate sale; or
1-21 (B) any intermediate or preliminary product that
1-22 will become an ingredient or component part of the product being
1-23 manufactured, processed, or fabricated for ultimate sale; [and]
1-24 (3) services performed directly on the product being
2-1 manufactured prior to its distribution for sale and for the purpose
2-2 of making the product more marketable; and
2-3 (4) actuators, steam production equipment and its
2-4 fuel, in-process flow through tanks, cooling towers, generators,
2-5 heat exchangers, electronic control room equipment, and
2-6 computerized control units that are used to power, supply, support,
2-7 or control equipment that qualifies for exemption under Subdivision
2-8 (2) or to generate electricity, chilled water, or steam for
2-9 ultimate sale.
2-10 (c) The exemption does not include:
2-11 (1) machinery, equipment, or replacement parts or
2-12 their accessories having a useful life when new in excess of six
2-13 months;
2-14 (2) intraplant transportation equipment, including
2-15 intraplant transportation equipment used to move a product or raw
2-16 material in connection with the manufacturing process and
2-17 specifically including all piping and conveyor systems;
2-18 (3) maintenance or janitorial supplies or equipment[,]
2-19 or other machinery, equipment, materials, or supplies that are used
2-20 incidentally in a manufacturing, processing, or fabrication
2-21 operation;
2-22 (4) [(3)] hand tools; [or]
2-23 (5) [(4)] office equipment or supplies, equipment or
2-24 supplies used in sales or distribution activities, research or
2-25 development of new products, or transportation activities, or other
2-26 tangible personal property not used in an actual manufacturing,
2-27 processing, or fabrication operation; or
3-1 (6) machinery and equipment or supplies used to
3-2 maintain or store tangible personal property.
3-3 (r) A taxpayer claiming an exemption under this section has
3-4 the burden of proof that the exemption is applicable and that no
3-5 exclusion under Subsection (c) applies.
3-6 (s) The following do not apply to the semiconductor
3-7 fabrication cleanrooms and equipment in Subsection (q):
3-8 (1) limitations in Subsection (a)(2) that refer to
3-9 tangible personal property directly causing chemical and physical
3-10 changes to the product being manufactured, processed, or fabricated
3-11 for ultimate sale;
3-12 (2) Subsection (c)(2); and
3-13 (3) Subsection (c)(6).
3-14 SECTION 2. This Act takes effect October 1, 1997.
3-15 SECTION 3. The importance of this legislation and the
3-16 crowded condition of the calendars in both houses create an
3-17 emergency and an imperative public necessity that the
3-18 constitutional rule requiring bills to be read on three several
3-19 days in each house be suspended, and this rule is hereby suspended.