Do fast-wearing cutting tools like circular saw blades and drill bits used in a manufacturing operation qualify for the sales tax manufacturing exemption, even though they wear out quickly?

Plain-English summary

A manufacturer asked whether "perishable tools" — circular saw blades, drill bits, and similar cutter blades that wear out relatively quickly — qualify for the sales tax manufacturing exemption. The Comptroller said yes: these cutting tools qualify for exemption because they're used directly in the manufacturing process, the same standard that applies to any manufacturing machinery or equipment. The letter specifically notes that an older rule requiring a tool to have at least a six-month useful life no longer applies — how fast the blade or bit wears out is not the test.

The governing test instead is functional: to qualify for exemption, machinery and equipment (including cutting tools) must be used directly in the manufacturing process and cause a chemical or physical change in the product being manufactured for sale.

What this means for you

Manufacturers buying cutting tools, blades, or bits

If your saw blades, drill bits, or cutter blades are used directly in your manufacturing process to physically change the product you're making for sale, they can qualify for the manufacturing exemption — regardless of how quickly they wear out or need replacing. You don't need to show the tool will last six months or longer; that old useful-life threshold is gone.

Accountants and tax professionals

This letter is useful as confirmation that Texas's manufacturing exemption test is purely functional (direct use in the process + causing a chemical or physical change), not tied to a tool's durability or expected service life. Older advice referencing a six-month useful-life requirement for "perishable tools" is outdated.

Common questions

Q: Do fast-wearing tools like saw blades and drill bits qualify for the manufacturing exemption?
A: Yes, as long as they're used directly in manufacturing and cause a chemical or physical change in the product being made for sale.

Q: Is there still a six-month useful-life requirement for these tools to qualify?
A: No. The Comptroller confirms that requirement no longer applies.

Q: Can I rely on this letter for my own tools and equipment?
A: No. This opinion is based on the facts submitted, and different facts may lead to a different answer.

Citations and references

No Texas Tax Code section or administrative rule is cited by number in the original letter.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200004230L

Original ruling text

Date: April 26, 2000

From: Bettie Peterson

To: **

Subject: perishable tools

Thank you for your recent email.

Circular saw blades and drill bits used in manufacturing qualify for exemption.
The six month useful life no longer is applicable. To qualify for exemption,
machinery and equipment must be used directly in the manufacturing process and
cause a chemical or physical change in the product being manufactured for sale.

Referenced rules are available at
.

The State Tax Automated Research system, which provides viewing and downloading
of rules, edited letter rulings, hearings, AG Opinions, etc., may be accessed
on the Internet at: http://www.window.state.tx.us/

This opinion is based on the facts you submitted and current law. Other facts
though similar, may result in different answers.

If you have questions or need more information, I will be glad to help you. You
may call me toll free from anywhere in the United States at 1-800-531-5441,
extension 5-0330