A Texas power plant operator’s purchases of turbines, generators, and accessories used to generate electricity did not qualify for the manufacturing exemption from sales and use tax because the operator was unable to prove that the machinery retained its identity as tangible personal property. Instead, the court ruled that the machinery was incorporated into real property. The machinery was connected by bolts to metal plates which were anchored and grounded into the facility’s foundations. The operator claimed that the machinery could be removed by detaching the bolts. Additionally, the machinery was connected to other machinery and equipment by extensive piping and cables. The main consideration in determining whether the machinery was annexed to real property is the purchasing party’s intent. The operator failed to submit sufficient proof of its intent for the machinery. For example, the operator did not submit evidence that the machinery could be removed without damage to the real property. Additionally, it did not submit evidence that the buildings housing the machinery were constructed so that they could be disassembled to allow for removal of the machinery. As a result, the court ruled that the machinery was incorporated into real property and is subject to Texas sales and use tax.
(Decision, Hearing No. 100,507, Texas Comptroller of Public Accounts, November 5, 2010, released March 2011)