Does metal detection equipment used for food-safety quality control during spice and seasoning processing qualify for Texas's manufacturing exemption?

Plain-English summary

A Texas food processor that blends and packages spices, herbs, and seasonings for food manufacturers, restaurants, and retail markets operates under a food-safety program (required by industry HACCP standards and inspections like the American Institute of Baking) that includes eliminating physical contaminants such as metal fragments from its products. The company purchased metal detection equipment specifically for this quality-control purpose and asked whether the equipment qualifies for Texas's manufacturing exemption.

The Comptroller confirmed it does. House Bill 3211 added subsection (a)(8) to Tax Code § 151.318, exempting tangible personal property used or consumed during the actual manufacturing, processing, or fabricating of tangible personal property for ultimate sale, when that use is necessary and essential to a quality control process. Since the metal detector screens the spice/seasoning product itself during processing, for a food-safety purpose that's necessary and essential to quality control, it fits squarely within this exemption. The letter adds the standard caveat: any use of the metal detector OUTSIDE actual manufacturing, fabrication, or processing of goods for ultimate sale is a taxable divergent use.

What this means for you

Food processors and manufacturers running contaminant-detection quality control

Metal detectors, X-ray inspection systems, or similar quality-control equipment used during actual production — screening the product itself for safety before sale — can qualify for the manufacturing exemption under § 151.318(a)(8), as long as the use is necessary and essential to your quality control process.

Manufacturers generally, in any industry with a QC step

The § 151.318(a)(8) exemption isn't limited to food processors; it covers testing/inspection equipment used during manufacturing or processing of any tangible personal property destined for ultimate sale, whenever that use is necessary and essential to quality control.

Accountants and tax professionals

Watch for divergent use: if quality-control equipment purchased under this exemption gets used for any purpose outside actual production (e.g., testing something unrelated to the manufactured product line), that use becomes taxable.

Common questions

Q: Does quality-control equipment like a metal detector qualify for the manufacturing exemption?
A: Yes, when its use during actual manufacturing, processing, or fabrication of goods for ultimate sale is necessary and essential to a quality control process, under Tax Code § 151.318(a)(8).

Q: Is this exemption specific to food processors?
A: No — the statute applies broadly to quality-control equipment used in manufacturing or processing tangible personal property for ultimate sale, not just food products.

Q: What happens if the equipment is used for something other than quality control during production?
A: Any such use is a taxable divergent use.

Q: Can other manufacturers rely on this exact letter?
A: No. This is a Texas STAR letter ruling binding on the Comptroller only for the taxpayer it addresses (34 Tex. Admin. Code Rules 3.1, 3.10); confirm your own facts with a tax professional.

Citations and references

Statutes:

• Tex. Tax Code § 151.318(a)(8) (manufacturing exemption; quality control equipment, added by H.B. 3211)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200009660L

Original ruling text

September 5, 2000

From: Emilio Lerma

To:

Subject: FW: Sales Tax Exemptions

Dear **:

I am responding to your e-mail regarding the exemption of metal detection
equipment used in processing spices, herbs, and seasonings.

You state that you blend and package spices, herbs and seasonings. Part of
your safety program is the elimination of physical contaminates including metal
fragments from your products. You have purchased metal detection equipment for
quality control and would like to know if the equipment qualifies for the
manufacturing exemption.

House Bill 3211 amended Texas Tax Code Section 151.318 to add Subsection
(a)(8). This subsection exempts tangible personal property used or consumed
during the actual manufacturing, processing, or fabricating of tangible
personal property for ultimate sale if the use or consumption is necessary and
essential to a quality control process. Any other use of the metal detector not
during the actual manufacturing, fabrication or processing of tangible personal
property for ultimate sale is divergent use.

To view or down load the Tax Code, please go to our web site address at
and scroll to the
specific code section.

This opinion is rendered based on the facts presented. Other facts though
similar, may yield different results.

If you have any questions or require additional information, you may submit
inquiries to our tax help Internet address at , call
1-800-531-5441, extension 6-5809 or write to Tax Policy Division, Post Office
Box 13825, Austin, Texas 78711-3825.

Sincerely

Emilio S. Lerma
Tax Policy Division

Date: Thu, 24 Aug 2000 10:21:06 -0500
From: **
Subject: FW: Sales Tax Exemptions

Hi Emilio,

Thank you for taking my call day before yesterday regarding our new equipment
purchases and your willingness to help with researching the sales taxes
associated with them.

The COMPANY A is a Texas Food Processor. We blend and package spices, herbs
and seasonings for food manufacturers, restaurants, and retail markets. Our
web address is www.valdezspice.com which can clarify who we are and what we do,
if that helps in anyway. We have a current Food Manufacturing License through
the State of Texas that we renew every year. We operate under Title 9 Animals
and Animal Products of the CFR (Code of Federal Regulations) as well as CFR
Title 21 Food and Drugs. The Fish, Meat and Poultry Industries are required to
have a HACCP Program in place (Hazard Analysis of Critical Control Points)
which forces their suppliers to have an established HACCP Program as well.
Part of this food safety program deals with the elimination of physical
contaminates of which metal fragments are considered, thus making metal
detection a necessity in our production line. We are also inspected by the AIB
(American Institute of Baking) and received a Superior Rating. They are a
highly regarded food safety inspection agency, and metal detectors are a
requirement through them as well.

I will fax you copies of the Metal detector information as well as the CFR
rulings on the above, the only problem is that I do not have a fax number for
you and I don't know how to scan and clip these on to this email yet.

Many thanks,

COMPANY A
Tele # **
Fax # **