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Ezel / Tax Rulings / TX
TX 8608L0750B08 Sales and/or Use Tax (State,Local,MTA) 1986-08-25

Could a floppy-disc manufacturer buy lapping film tax-free when it used the film to polish magnetic sheets and remove debris before sale?

Short answer: Yes. The Comptroller found the lapping film necessary and essential to manufacturing marketable floppy discs, so it could be purchased tax-free with an exemption certificate.

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This page answers the general question as of 1986. Ezel answers yours, under current Texas tax law, with citations.

Currency note: this ruling is from 1986
Subsequent statutory amendments, regulation changes, court decisions, or later rulings may have changed the analysis. Treat this page as historical context, not current tax advice. Verify current law before relying on any specific rule, rate, or position mentioned here.
Disclaimer: This is an official Texas Comptroller of Public Accounts letter published on the State Tax Automated Research (STAR) system. Letters on STAR can be the basis of a detrimental reliance claim only for the taxpayer to whom the letter was directly issued (see 34 Tex. Admin. Code Rules 3.1 and 3.10); documents on STAR may no longer represent current policy even if not marked superseded. Taxpayer-identifying details are redacted. This summary is informational only and is not legal or tax advice. Consult a licensed Texas tax professional about your specific situation.
About this page: The plain-English summary, reader guidance, and Q&A below were written by Ezel based on the official state tax ruling. The original ruling (linked on this page) is the authoritative source for any reliance.

Plain-English summary

The manufacturer received rough, magnetically coated sheets and processed them into computer floppy discs. Debris and magnetic particles had to be removed before the product could be marketed.

The Comptroller concluded that the lapping film used to polish those sheets was necessary and essential to the manufacturing process. The manufacturer could therefore buy the film tax-free by giving its supplier an exemption certificate instead of tax.

Common questions

Could the manufacturer buy the lapping film tax-free? Yes.

Why did the film qualify? It was necessary and essential to polishing the magnetic sheets and removing material before the floppy discs could be marketed.

What documentation could the manufacturer give the supplier? An exemption certificate in lieu of tax.

Source

Original ruling text

August 25, 1986

Dear ***:

Thank you for your recent letter regarding the taxability of lapping
film.

As we discussed, you receive sheets of magnetically coated material which
you process into computer floppy discs. The material is rough and may have
debris and magnetic particles which must be removed before the product
can be marketed.

In my opinion, the lapping film used to polish the magnetic sheets is
necessary and essential to the manufacturing process and may be purchased
tax free for that purpose. You may issue your supplier an exemption
certificate in lieu of tax.

I am enclosing an exemption certificate for your use.

This opinion is based upon the facts you presented. If there are
additional or different facts, this opinion may change.

Please feel free to contact us if you have additional questions. You may
write us, call toll free 1-800-252-5555 from anywhere in Texas.

Sincerely,

Tax Policy Section
Tax Administration Division

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