A Texas appeals court recently ruled in favor of ChampionX LLC, deciding that reusable containers used in its business do not have to be taxed. The decision is an important win for manufacturers and could have broader implications for how similar equipment is taxed.
ChampionX makes chemicals used in industries like oil, gas, and water treatment. To do this, it uses large containers to hold and move the chemicals during production. After the customers use the containers, ChampionX picks them up, cleans them, and reuses them. ChampionX had originally paid sales and use tax on these containers and related services, such as cleaning and delivery, but later requested a refund claiming the manufacturing exemption. The state denied the refund claim arguing that the containers did not qualify for a tax exemption. At the center of the dispute were two different tax rules: Manufacturing Exemption (Section 151.318) which applies to items used directly in manufacturing and Container Exemption (Section 151.322) which applies specifically to certain types of containers.
The court agrees with ChampionX, concluding that the containers were used during the manufacturing process and were necessary and essential to production. As a result, they qualified for exemption under the manufacturing exemption. The state argued that the more specific container exemption should override the manufacturing exemption, but the court rejected this argument. The court explained that both rules can exist side by side. Just because something does not qualify under one exemption does not mean it cannot qualify under another. Additionally, the state argued that the containers were mainly used for transportation or storage, which would me them taxable. The court emphasized that manufacturing includes the full production process through completion and packaging and that the containers played a critical and necessary role to safely produce and handle the chemicals, making them part of the manufacturing process. Finally, the court ruled that services tied to the containers, like cleaning, pickup, and delivery are also exempt. Since the containers themselves qualify for exemption, the services performed on them qualify as well. In the end, the court confirmed that ChampionX is entitled to a tax refund.
For manufacturers, especially those using reusable containers, packaging systems, or regulated transport equipment, this case provides strong support for applying the manufacturing exemption more broadly. It also highlights opportunities for refund claims and audit defense strategies where tax may have been overpaid.
(Hancock v. ChampionX, LLC, No. 15-24-00111-CV, Texas Fifteenth Court of Appeals, February 12, 2026)