Can a meat processing plant buy aprons/frocks, refuse receptacles, and liquid soap/disinfectants tax-free under the public-health-compliance manufacturing exemption?

Plain-English summary

A meat processing plant followed up on an earlier Comptroller response with three specific questions about whether certain federally-mandated items could be purchased tax-free under Tax Code § 151.318(a)(10) — the exemption for tangible personal property used or consumed in manufacturing when necessary and essential to comply with federal, state, or local public-health laws.

1. Aprons/frocks/outer garments — 9 C.F.R. § 416.5(b) requires that clothing worn by meat handlers, if disposable or reusable, be clean and changed as often as necessary. The Comptroller ruled these are not exempt: the federal regulation only dictates that garments must be clean if worn — it doesn't affirmatively require the plant to purchase and provide aprons or frocks in the first place. The Comptroller reviewed several prior administrative hearings on this exact question (Hearing 39,327 on paper towels — decided on the separate hand-tool issue, not public health; Hearing 8,191, superseded; Hearing 38,786/STAR Document 200102166H, which similarly held that the public-health statute requires clean garments but not aprons specifically; and Comptroller's Decision No. 27,394, which denied exemption to work uniforms, shoes, paper caps, and chef's hats because no FDA regulation was shown to require wearing them).

2. Refuse receptacles/containers — 9 C.F.R. § 416.2(h)(3) requires that receptacles, if used, be constructed/maintained to prevent unsanitary conditions. The Comptroller ruled these are not exempt either, applying the same logic: the regulation conditions cleanliness on the receptacles being used, but doesn't affirmatively require the plant to have them. The Comptroller added a pointed illustration of why it wouldn't extend the exemption further: the same regulatory section also requires clean toilet rooms and lavatories with hot/cold water, soap, and towels — but that doesn't mean dressing rooms, lavatories, and toilets themselves become tax-exempt.

3. Liquid soap and disinfectants — 9 C.F.R. § 307.2(f) requires "adequate arrangements, including liquid soap and cleansers," for disinfecting hands, tools, floors, and contaminated surfaces. Here the Comptroller agreed the exemption does apply, and specifically extended it to all meat processing personnel, not just USDA inspectors — because the federal regulation affirmatively mandates these cleaning supplies, not merely conditions their use on cleanliness.

The letter also explains the legislative backstory: § 151.318(a)(10) was added retroactively by House Bill 3211 (effective October 1, 1999) to restore exemption treatment the Comptroller had allowed by rule/policy before House Bill 1855 (effective October 1, 1997) had stripped it away — the Comptroller reads current treatment of uniforms, receptacles, soap, and restrooms as consistent with that legislative intent.

What this means for you

Meat and food processors buying compliance-driven supplies

The exemption in § 151.318(a)(10) hinges on whether a federal/state/local regulation affirmatively requires you to purchase or provide an item, versus merely regulating its condition if you choose to use it. Liquid soap/disinfectants cleared that bar in this ruling; aprons/frocks and refuse receptacles did not, even though all three are used in the same regulated, sanitation-heavy operation.

Accountants and tax professionals

This letter is a useful, detailed application of the "affirmatively required vs. conditionally regulated" distinction under § 151.318(a)(10), cross-referencing several administrative hearing precedents (39,327; 8,191 superseded; 38,786) and Comptroller's Decision No. 27,394 — helpful when advising any regulated food/meat processor on which compliance supplies can be purchased tax-free.

Common questions

Q: Is any item required by federal food-safety regulation automatically tax-exempt?
A: No — per this ruling, the regulation must affirmatively require you to purchase/provide the item. If it only conditions the item's cleanliness or use (assuming you choose to use it), that's not enough to qualify.

Q: Why is liquid soap exempt but aprons are not, when both come from similar sanitation rules?
A: The soap regulation (9 C.F.R. § 307.2(f)) affirmatively mandates "adequate arrangements, including liquid soap." The apron regulation (9 C.F.R. § 416.5(b)) only requires that aprons, if worn, be clean — it doesn't require wearing them in the first place.

Q: Does the soap exemption cover only USDA inspectors' hand-washing?
A: No — the Comptroller specifically agreed the exemption for liquid soap extends to all meat processing personnel, not just USDA inspectors.

Q: Can another meat processor rely on this letter?
A: No. It answers this specific company's three items; a different item would need its own analysis under the same affirmatively-required-vs-conditionally-regulated test.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.318(a)(10) (Manufacturing Exemption — public health compliance)
• 34 Tex. Admin. Code Rule 3.300(d)(7)(B)
• 9 C.F.R. § 416.5(b) (Clothing)
• 9 C.F.R. § 416.2(h)(3) (Refuse Receptacles)
• 9 C.F.R. § 307.2(f) (Sanitation)
• Administrative Hearing Nos. 39,327; 8,191 (superseded); 38,786 (STAR Document 200102166H)
• Comptroller's Decision No. 27,394 (1992)
• House Bill 3211 (eff. 10/1/1999); House Bill 1855 (eff. 10/1/1997)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/200106319L

Original ruling text

June 8, 2001

Dear **:

Thank you for your recent letter concerning items purchased by a meat
processing plant. You had three areas of concern with a response by Al Van
Allen dated April 13, 2001.

Section 151.318(a)(10) of the Texas Tax Code provides an exemption for tangible
personal property used or consumed in the manufacturing process if the use or
consumption of the property is necessary and essential to comply with federal,
state, or local laws or rules that establish requirements related to public
health.

1. You point out that Section 416.5 (b) of the Code of Federal Regulations
   requires persons handling meat to wear aprons, frocks or other outer garments,
   which serve as a sterile barrier between the employee's clothing and the
   carcass. You asked if your client could purchase these clothing tax-free for
   its employees.

Response. The Code of Federal Regulations 416.5 (b) states "Clothing. Aprons,
frocks, and other outer clothing worn by persons who handle product must be of
material that is disposable or readily cleaned. Clean garments must be worn at
the start of each working day and garments must be changed during the day as
often as necessary to prevent adulteration of product and the creation of
insanitary conditions." This statute does not require the purchase and use of
frocks and aprons. It just states that, if worn, they are to be clean.

Whether paper towels were required by law for public health was not an issue in
Administrative Hearing No. 39,327. The only argued point was whether the item
was a hand tool and therefore excluded from exemption. Whether aprons were
required by law was not an issue in Administrative Hearing 8,191 (superseded).
The issue of work clothing was discussed in Administrative Hearing 38,786 (STAR
Document 200102166H). This hearing denied exemption to aprons and linen
rentals because the statute for public health "require clean outer garments or
clean outer clothing to be worn, but do not require aprons to be worn."
[FOOTNOTE: See Finding of Fact No. 10.] Also, Comptroller's Decision No. 27,394
(1992) holds that, "where no evidence was submitted that FDA regulations
required the contested work uniforms, shoes, paper caps and chef's hats (all
considered to be work clothing) to be worn, the purchased items were not exempt
under Rule 3.300(d)(7)(B)."

2. CFR Section 416.2 (h)(3) requires your client to provide refuse receptacles
   or containers for scraps, used gloves, etc., in order to protect against the
   creation of insanitary conditions and the adulteration of product. You asked if
   your client could purchase these receptacles or storage containers tax-free.

Response. The cited section states "Refuse receptacles must be constructed and
maintained in a manner that protects against the creation of insanitary
conditions and the adulteration of product." We do not believe that fits the
exemption stated in Section 151.318(a)(10) of the Texas Tax Code. If this sort
of interpretation were allowed, Section 416.2(h) could be used to exempt
"Dressing rooms, lavatories, and toilets" because the statute states that
"toilet rooms, and urinals must be sufficient in number, ample in size,
conveniently located, and maintained in a sanitary condition and in good repair
at all times to ensure cleanliness of all persons handling any product" and
that "lavatories with running hot and cold water, soap, and towels, must be
placed in or near toilet and urinal rooms and at such other places in the
establishment as necessary to ensure cleanliness of all persons handling any
product."

In short, Section 151.318(a)(10) of the statute was added as a retroactive
clarification of policy by House Bill 3211 (October 1, 1999). The legislative
intent was that it would allow certain exemptions that we felt House Bill 1855
(October 1, 1997) had stripped away but that we had allowed by rule and policy
prior to the passage of House Bill 1855. The current treatment of uniforms,
receptacles, soaps, restrooms, and other manufacturing items is consistent with
the legislative intent of House Bill 3211.

3. CFR Section 307.2(f) requires your client to provide liquid soap and other
   cleansers for cleaning and disinfecting hands, floors, and other articles and
   places as may be contaminated by diseased carcasses. You asked if your client
   can purchase liquid soap, bleach, disinfectants and other chemicals used for
   the aforementioned purposes tax-free.

Response CFR Section 307.2 (f) states that "adequate arrangements, including
liquid soap and cleansers, for cleansing and disinfecting hands, for
sterilizing all implements used in dressing diseased carcasses, floors, and
such other articles and places as may be contaminated by diseased carcasses or
otherwise." I am in agreement that the exemption for liquid soap to wash hands
extends to all meat processing personnel and not just USDA inspectors.

This opinion is based on the facts presented. If there are additional or
different facts, the opinion may change. You may call me toll free at
1-800-531-5441, ext. 5-0613. The direct line is 512/475-0613. You may also
write to Tax Policy Division, Comptroller of Public Accounts.

Sincerely,

Kevin Koller
Tax Policy Division