1-1 By: Eiland (Senate Sponsor - Ratliff) H.B. No. 1855
1-2 (In the Senate - Received from the House May 6, 1997;
1-3 May 7, 1997, read first time and referred to Committee on Finance;
1-4 May 9, 1997, reported favorably by the following vote: Yeas 11,
1-5 Nays 0; May 9, 1997, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to sales tax exemption for items used in manufacturing
1-9 tangible personal property for ultimate sale.
1-10 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-11 SECTION 1. Section 151.318, Tax Code, is amended by amending
1-12 Subsections (a) and (c) and adding Subsections (r) and (s) to read
1-13 as follows:
1-14 (a) The following items are exempted from the taxes imposed
1-15 by this chapter:
1-16 (1) tangible personal property that will become an
1-17 ingredient or component part of tangible personal property
1-18 manufactured, processed, or fabricated for ultimate sale;
1-19 (2) tangible personal property directly used or
1-20 consumed in or during the actual manufacturing, processing, or
1-21 fabrication of tangible personal property for ultimate sale if the
1-22 use or consumption of the property is necessary or essential to the
1-23 manufacturing, processing, or fabrication operation and directly
1-24 makes or causes a chemical or physical change to:
1-25 (A) the product being manufactured, processed,
1-26 or fabricated for ultimate sale; or
1-27 (B) any intermediate or preliminary product that
1-28 will become an ingredient or component part of the product being
1-29 manufactured, processed, or fabricated for ultimate sale; [and]
1-30 (3) services performed directly on the product being
1-31 manufactured prior to its distribution for sale and for the purpose
1-32 of making the product more marketable; and
1-33 (4) actuators, steam production equipment and its
1-34 fuel, in-process flow through tanks, cooling towers, generators,
1-35 heat exchangers, electronic control room equipment, and
1-36 computerized control units that are used to power, supply, support,
1-37 or control equipment that qualifies for exemption under Subdivision
1-38 (2) or to generate electricity, chilled water, or steam for
1-39 ultimate sale.
1-40 (c) The exemption does not include:
1-41 (1) machinery, equipment, or replacement parts or
1-42 their accessories having a useful life when new in excess of six
1-43 months;
1-44 (2) intraplant transportation equipment, including
1-45 intraplant transportation equipment used to move a product or raw
1-46 material in connection with the manufacturing process and
1-47 specifically including all piping and conveyor systems;
1-48 (3) maintenance or janitorial supplies or equipment[,]
1-49 or other machinery, equipment, materials, or supplies that are used
1-50 incidentally in a manufacturing, processing, or fabrication
1-51 operation;
1-52 (4) [(3)] hand tools; [or]
1-53 (5) [(4)] office equipment or supplies, equipment or
1-54 supplies used in sales or distribution activities, research or
1-55 development of new products, or transportation activities, or other
1-56 tangible personal property not used in an actual manufacturing,
1-57 processing, or fabrication operation; or
1-58 (6) machinery and equipment or supplies used to
1-59 maintain or store tangible personal property.
1-60 (r) A taxpayer claiming an exemption under this section has
1-61 the burden of proof that the exemption is applicable and that no
1-62 exclusion under Subsection (c) applies.
1-63 (s) The following do not apply to the semiconductor
1-64 fabrication cleanrooms and equipment in Subsection (q):
2-1 (1) limitations in Subsection (a)(2) that refer to
2-2 tangible personal property directly causing chemical and physical
2-3 changes to the product being manufactured, processed, or fabricated
2-4 for ultimate sale;
2-5 (2) Subsection (c)(2); and
2-6 (3) Subsection (c)(6).
2-7 SECTION 2. This Act takes effect October 1, 1997.
2-8 SECTION 3. The importance of this legislation and the
2-9 crowded condition of the calendars in both houses create an
2-10 emergency and an imperative public necessity that the
2-11 constitutional rule requiring bills to be read on three several
2-12 days in each house be suspended, and this rule is hereby suspended.
2-13 * * * * *