By Chavez H.B. No. 175
Line and page numbers may not match official copy.
Bill not drafted by TLC or Senate E&E.
A BILL TO BE ENTITLED
1-1 AN ACT
1-2 relating to the expansion of the sales tax exemptions for film and
1-3 video producers and music producers.
1-4 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-5 SECTION 1. Ch. 151, Sec. 151.318, Tax Code, is amended by
1-6 adding Subsection (b)(3) and deleting Subsections (c)(3) and (p)
1-7 and renumerating subsequent subsections to read as follows:
1-8 Sec. 151.318. PROPERTY USED IN MANUFACTURING. (a) The
1-9 following items are exempted from the taxes imposed by this
1-10 chapter:
1-11 (1) tangible personal property that will become an
1-12 ingredient or component part of tangible personal property
1-13 manufactured, processed, or fabricated for ultimate sale;
1-14 (2) tangible personal property directly used or
1-15 consumed in or during the actual manufacturing, processing, or
1-16 fabrication of tangible personal property for ultimate sale if the
1-17 use or consumption of the property is necessary or essential to the
1-18 manufacturing, processing, or fabrication operation and directly
1-19 makes or causes a chemical or physical change to:
1-20 (A) the product being manufactured, processed,
1-21 or fabricated for ultimate sale; or
2-1 (B) any intermediate or preliminary product that
2-2 will become an ingredient or component part of the product being
2-3 manufactured, processed, or fabricated for ultimate sale;
2-4 (3) services performed directly on the product being
2-5 manufactured prior to its distribution for sale and for the purpose
2-6 of making the product more marketable;
2-7 (4) actuators, steam production equipment and its
2-8 fuel, in-process flow through tanks, cooling towers, generators,
2-9 heat exchangers, electronic control room equipment, computerized
2-10 control units, compressors, and hydraulic units, that are used to
2-11 power, supply, support, or control equipment that qualifies for
2-12 exemption under Subdivision (2) or to generate electricity, chilled
2-13 water, or steam for ultimate sale; and
2-14 (5) machinery, equipment, and replacement parts or
2-15 accessories used or consumed in the actual manufacturing,
2-16 processing, or fabrication of tangible personal property for
2-17 ultimate sale if their use or consumption is necessary and
2-18 essential to a pollution control process.
2-19 (b) The exemption includes:
2-20 (1) chemicals, catalysts, and other materials that are
2-21 used during a manufacturing, processing, or fabrication operation
2-22 to produce or induce a chemical or physical change, to remove
2-23 impurities, or to make the product more marketable; [and]
2-24 (2) semiconductor fabrication cleanrooms and
2-25 equipment; and
3-1 (3) the production for consideration of a motion
3-2 picture or a video or audio recording, a copy of which is sold or
3-3 offered for ultimate sale, licensed, distributed, broadcast, or
3-4 otherwise exhibited, is considered "manufacturing" for the purposes
3-5 of this section. An exemption shall also apply to machinery, motor
3-6 vehicles that are rented or purchased for such a production, and
3-7 equipment that is rented or leased for such a production
3-8 (c) The exemption does not include:
3-9 (1) intraplant transportation equipment, including
3-10 intraplant transportation equipment used to move a product or raw
3-11 material in connection with the manufacturing process and
3-12 specifically including all piping and conveyor systems, provided
3-13 that piping that is a component part of a single item of
3-14 manufacturing equipment or pollution control equipment eligible for
3-15 the exemption under Subsection (a)(2), (a)(4), or (a)(5) remains
3-16 eligible for the exemption;
3-17 (2) maintenance or janitorial supplies or equipment or
3-18 other machinery, equipment, materials, or supplies that are used
3-19 incidentally in a manufacturing, processing, or fabrication
3-20 operation;
3-21 [(3) hand tools;]
3-22 [(4)] (3) office equipment or supplies, equipment or
3-23 supplies used in sales or distribution activities, research or
3-24 development of new products, or transportation activities, or other
3-25 tangible personal property not used in an actual manufacturing,
4-1 processing, or fabrication operation; or
4-2 (5) machinery and equipment or supplies used to
4-3 maintain or store tangible personal property.
4-4 (d) In this section, "manufacturing" includes each operation
4-5 beginning with the first stage in the production of tangible
4-6 personal property and ending with the completion of tangible
4-7 personal property having the physical properties (including
4-8 packaging, if any) that it has when transferred by the manufacturer
4-9 to another.
4-10 (e) This section does not apply to any taxable item rented
4-11 or leased for less than one year to a person engaged in
4-12 manufacturing.
4-13 (f) Repealed by Acts 1997, 75th Leg., ch. 1390, Sec. 3, eff.
4-14 Oct. 1, 1997.
4-15 (g) Each person engaged in manufacturing, processing,
4-16 fabricating, or repairing tangible personal property for ultimate
4-17 sale is entitled to a refund or a reduction in the amount of tax
4-18 imposed by this chapter as provided by Subsection (h) for the
4-19 purchase of machinery, equipment, and replacement parts or
4-20 accessories with a useful life in excess of six months if the
4-21 equipment is:
4-22 (1) used or consumed in or during the actual
4-23 manufacturing, processing, fabrication, or repair of tangible
4-24 personal property for ultimate sale, and the use or consumption of
4-25 the property is necessary or essential to the manufacturing,
5-1 processing, fabrication, or repair operation, or to a pollution
5-2 control process; or
5-3 (2) specifically installed to:
5-4 (A) reduce water use and wastewater flow volumes
5-5 from the manufacturing, processing, fabrication, or repair
5-6 operation;
5-7 (B) reuse and recycle wastewater streams
5-8 generated within the manufacturing, processing, fabrication, or
5-9 repair operation; or
5-10 (C) treat wastewater from another industrial or
5-11 municipal source for the purpose of replacing existing freshwater
5-12 sources in the manufacturing, processing, fabrication, or repair
5-13 operation.
5-14 (h) to (m) Repealed by Acts 1997, 75th Leg., ch. 1390, Sec.
5-15 3, eff. Oct. 1, 1997.
5-16 (n) A person engaged in overhauling, retrofitting, or
5-17 repairing jet turbine aircraft engines and their component parts is
5-18 entitled to an exemption from the tax imposed by this chapter for
5-19 the purchase of machinery, equipment, or replacement parts or
5-20 accessories with a useful life in excess of six months, or
5-21 supplies, including aluminum oxide, nitric acid, and sodium
5-22 cyanide, used in electrochemical plating or a similar process that
5-23 are used or consumed in the overhauling, retrofitting, or
5-24 repairing.
5-25 (o) The production of a publication for the dissemination of
6-1 news of a general character and of a general interest that is
6-2 printed on newsprint and distributed to the general public free of
6-3 charge at a daily, weekly, or other short interval is considered
6-4 "manufacturing" for purposes of Subsections (d)-(m) of this
6-5 section.
6-6 [(p) The production for consideration of a motion picture or
6-7 a video or audio recording, a copy of which is sold or offered for
6-8 ultimate sale, licensed, distributed, broadcast, or otherwise
6-9 exhibited, is considered "manufacturing" for the purposes of this
6-10 section. An exemption shall also apply to machinery and equipment
6-11 that is rented or leased for such a production]
6-12 [(q)] (p) For purposes of Subsection (b), "semiconductor
6-13 fabrication cleanrooms and equipment" means all tangible personal
6-14 property, without regard to whether the property is affixed to or
6-15 incorporated into realty, used in connection with the
6-16 manufacturing, processing, or fabrication in a cleanroom
6-17 environment of a semiconductor product, without regard to whether
6-18 the property is actually contained in the cleanroom environment.
6-19 The term includes integrated systems, fixtures, and piping, all
6-20 property necessary or adapted to reduce contamination or to control
6-21 airflow, temperature, humidity, chemical purity, or other
6-22 environmental conditions or manufacturing tolerances, and
6-23 production equipment and machinery. The term does not include the
6-24 building or a permanent, nonremovable component of the building,
6-25 that houses the cleanroom environment. The term includes moveable
7-1 cleanroom partitions and cleanroom lighting. "Semiconductor
7-2 fabrication cleanrooms and equipment" are not "interplant
7-3 transportation equipment" or "used incidentally in a manufacturing,
7-4 processing, or fabrication operation" as those terms are used in
7-5 Subsections (c)(1) and (c)(2). Text of Subsec. (r) as added by
7-6 Acts 1997, 75th Leg., ch. 1040, Sec. 22
7-7 (r) For the purposes of this section, the manufacturing of
7-8 computer software begins with the design and writing of the code or
7-9 program for the software and includes the testing or demonstration
7-10 of the software. Text of Subsec. (r) as added by Acts 1997, 75th
7-11 Leg., ch. 1390, Sec. 1
7-12 (r) A taxpayer claiming an exemption under this section has
7-13 the burden of proof that the exemption is applicable and that no
7-14 exclusion under Subsection (c) applies.
7-15 (s) The following do not apply to the semiconductor
7-16 fabrication cleanrooms and equipment in Subsection (q):
7-17 (1) limitations in Subsection (a)(2) that refer to
7-18 tangible personal property directly causing chemical and physical
7-19 changes to the product being manufactured, processed, or fabricated
7-20 for ultimate sale;
7-21 (2) Subsection (c)(1); and
7-22 (3) Subsection (c)(5).
7-23 SECTION 2. This Act takes effect September 1, 1998.
7-24 SECTION 3. The importance of this legislation and the
7-25 crowded condition of the calendars in both houses create an
8-1 emergency and an imperative public necessity that the
8-2 constitutional rule requiring bills to be read on three several
8-3 days in each house be suspended, and this rule is hereby suspended,
8-4 and that this Act take effect and be in force from and after its
8-5 passage, and it is so enacted.