1-1 By: Ratliff S.B. No. 1424
1-2 (In the Senate - Filed March 13, 1997; March 19, 1997, read
1-3 first time and referred to Committee on Finance; April 8, 1997,
1-4 reported favorably by the following vote: Yeas 11, Nays 0;
1-5 April 8, 1997, sent to printer.)
1-6 A BILL TO BE ENTITLED
1-7 AN ACT
1-8 relating to the qualification for sales and use tax exemption of
1-9 certain property used in manufacturing.
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 Subsection (r) to read as
1-13 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 the product being
1-25 manufactured, processed, or fabricated for ultimate sale; and
1-26 (3) services performed directly on the product being
1-27 manufactured prior to its distribution for sale and for the purpose
1-28 of making the product more marketable.
1-29 (c) The exemption does not include:
1-30 (1) machinery, equipment, or replacement parts or
1-31 their accessories having a useful life when new in excess of six
1-32 months;
1-33 (2) intraplant transportation equipment, including
1-34 intraplant transportation equipment used to move a product or raw
1-35 material in connection with the manufacturing process and
1-36 specifically including all piping and conveyor systems;
1-37 (3) maintenance or janitorial supplies or equipment[,]
1-38 or other machinery, equipment, materials, or supplies that are used
1-39 incidentally in a manufacturing, processing, or fabrication
1-40 operation;
1-41 (4) [(3)] hand tools; [or]
1-42 (5) [(4)] office equipment or supplies, equipment or
1-43 supplies used in sales or distribution activities, research or
1-44 development of new products, or transportation activities, or other
1-45 tangible personal property not used in an actual manufacturing,
1-46 processing, or fabrication operation;
1-47 (6) machinery and equipment or supplies used to
1-48 manufacture, maintain, repair, or remodel items that are not sold;
1-49 or
1-50 (7) machinery and equipment or supplies used to
1-51 maintain or store tangible personal property.
1-52 (r) A taxpayer claiming exemption under this section must
1-53 maintain proof that purchases of taxable services and tangible
1-54 personal property are exempted under this section and not excluded
1-55 from the exemption.
1-56 SECTION 2. This Act takes effect September 1, 1997.
1-57 SECTION 3. The importance of this legislation and the
1-58 crowded condition of the calendars in both houses create an
1-59 emergency and an imperative public necessity that the
1-60 constitutional rule requiring bills to be read on three several
1-61 days in each house be suspended, and this rule is hereby suspended.
1-62 * * * * *