Texas Administrative Code › Title 34 - PUBLIC FINANCE › Part 1 - COMPTROLLER OF PUBLIC ACCOUNTS › Chapter 3 - TAX ADMINISTRATION › Subchapter O - STATE AND LOCAL SALES AND USE TAXES › Section 3.300 - Manufacturing; Custom Manufacturing; Fabricating; Processing (Tax Code, Sections 151.005, 151.007, 151.318, and 151.3181)

Current through Reg. 49, No. 28; July 12, 2024
(a) Definitions. The following words and
				  terms, when used in this section, shall have the following meanings, unless the
				  context clearly indicates otherwise.
(1)
				  Accessory--A machine fixture that causes the machinery to operate in a
				  specialized way.
(2) Custom
				  manufacturing--Producing tangible personal property to the special order of the
				  customer, e.g., tailor-made clothing, custom-made draperies or slip-covers, or
				  furniture made-to-order. Custom manufacturers are manufacturers for the purpose
				  of this section.
(3) Display
				  item--A manufactured item that is identical in size and function to other items
				  held for sale which it represents and that is ultimately sold at retail. For
				  example, manufacturer's apparel lines, furniture showroom pieces, light fixture
				  displays.
(4) Equipment--Any
				  apparatus, work clothing, device, or simple machines used directly in
				  production.
(5) Fabrication--To
				  make, build, create, produce, or assemble components of tangible personal
				  property, or to make tangible personal property work in a new or different
				  manner.
(6) Hand tool--An
				  instrument that is to be used, managed, and powered by the hand (e.g., paint
				  brush, trowel, hammer, screwdriver, files). Equipment that is controlled or
				  operated by the hand, but is moved or powered by electricity, gas, steam, or
				  other fuel, is not a hand tool (e.g., electric drill, chain saw, jack
				  hammer).
(7) Machinery--All
				  power-operated machines.
(8)
				  Manufacturer--A person who is engaged in manufacturing. The definition includes
				  processors, fabricators, submanufacturers, and custom manufacturers.
(9) Manufacturing--Each operation beginning
				  with the first stage in the production of tangible personal property and ending
				  with the completion of tangible personal property. The first production stage
				  means the first act of production, and it shall not include those acts in
				  preparation for production. For example, a lumber company that cuts trees or a
				  manufacturer that gathers, arranges, or sorts raw materials or inventory is
				  preparing for production. The first production stage for the manufacturing of
				  software is the design and writing of the code or program, and manufacturing
				  includes the testing or demonstration of the software. Manufacturing includes
				  the repair or rebuilding of tangible personal property that the manufacturer
				  owns for the purpose of being sold, but does not include the repair or
				  rebuilding of property that belongs to another.
(A) Completion of production means the
				  tangible personal property has all the physical properties, including
				  packaging, if any, that it has when transferred by the manufacturer to another.
				  For example, a manufacturer of raw rubber has completed production when the raw
				  rubber is ready to be transferred to a manufacturer of rubber goods.
(B) Processing and fabrication are two
				  activities that are performed during manufacturing. For example, the person who
				  takes raw steel and makes pipe is engaged in fabrication. The workers who coat
				  or thread the pipe are engaged in processing.
(10) Processing--The physical application of
				  the materials and labor necessary to modify or to change the characteristics of
				  tangible personal property. The repair of tangible personal property, belonging
				  to another, by restoring it to its original condition is not considered
				  processing of that property. The mere packing, unpacking, or shelving of a
				  product to be sold will not be considered to be processing of that property.
				  Processing does not include remodeling.
(11) Remodeling--To make tangible personal
				  property belonging to another over again, in a similar but different way, or to
				  change the style, shape, or form, without causing a loss of its identity, or
				  without causing the property to work in a new or different manner.
(12) Replacement part--Any repair part
				  attached to the machinery, equipment, or accessory.
(13) Sample--A scale model or representative
				  piece of a manufactured product held for sale. For example, cloth swatches and
				  wallpaper books.
(14) Semiconductor
				  fabrication and pharmaceutical biotechnology cleanrooms and equipment--All
				  tangible personal property, without regard to whether the property is affixed
				  to or incorporated into realty, that is used in connection with the
				  manufacturing, processing, or fabrication in a cleanroom environment of a
				  semiconductor product or a pharmaceutical biotechnology product, without regard
				  to whether the property is actually contained in the cleanroom environment. The
				  term includes integrated systems, fixtures, and piping; moveable cleanroom
				  partitions and cleanroom lighting; all property necessary or adapted to reduce
				  contamination or to control airflow, temperature, humidity, chemical purity, or
				  other environmental conditions or manufacturing tolerances; production
				  equipment and machinery; all tangible personal property that moves the product
				  or other materials that are necessary and essential to the process, including
				  piping that is used to move gas, liquids, deionized water, and hazardous waste
				  material; silicon wafer moving, handling, and tracking systems; and electrical
				  supply and control equipment, such as switches, wiring, and monitoring
				  equipment that is incorporated into the realty. The term does not include the
				  building or any permanent, nonremovable structural component part of the
				  building, such as vibration-isolation platforms and vibration
				  columns.
(15) Submanufacturer--A
				  person who performs one or more of the manufacturing operations described in
				  paragraph (9) of this subsection upon a product, or upon an intermediate or
				  preliminary product, for a manufacturer.