The Texas Comptroller of Public Accounts issued new guidance for manufacturing exemptions stating that exemptions for state sales and use tax apply to those who manufacture, fabricate, or process tangible personal property for sale.
The following are exempt from Texas sales and use tax:
The manufacturers who qualify for the exemption include those who perform any of the following activities:
Contractors, repair people, and service providers, such as telecommunications service providers or data processors, do not qualify for the exemption. While the manufacturing exemption only applies to machinery and equipment that physically or chemically change the product to make it saleable, some items, like hand tools, are not exempt (more detailed guidance for specific situations can be found here). Taxpayers should evaluate whether specified items are defined as manufacturing based on their use, and therefore such items may be qualified as exempt.