Could a Texas industrial processor buy oxygen and similar gases tax-free when the gases were consumed in processing or used in repairs?

Plain-English summary

The Texas Comptroller said oxygen, acetylene, and similar gases could be purchased tax-free when consumed while processing an item for resale. The purchaser could issue an exemption certificate, which required no permit number, or a resale certificate, which did require a permit number.

Gases used to repair tangible personal property were different: the letter treated them as taxable supply items that did not qualify for exemption.

The supplier did not have to accept either certificate instead of collecting tax. Because this supplier would accept only resale certificates, the purchaser needed a valid Texas or other-state sales-tax permit to issue one. The letter said the purchaser's Texas permit had then been issued after earlier franchise-tax-return problems.

What this means for you

The use of the gas controlled the result. Consumption in processing an item for resale supported the stated certificate treatment; consumption in a repair did not. The purchaser also had to satisfy the chosen certificate's permit requirements and the supplier could decline the certificate.

Common questions

Could processing gases be bought tax-free? Yes, when consumed while processing an item for resale and supported by an exemption or resale certificate.

Could repair gases be bought tax-free under this letter? No. They were taxable supplies.

Did an exemption certificate require a permit number? No, according to the letter.

Did a resale certificate require a permit? Yes.

Was the supplier required to accept a certificate? No.

Citations and references

• Comptroller Rule 3.300 — manufacturing.
• Comptroller Rule 3.292 — repairs.
• Comptroller Rule 3.285 — resale certificates.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/8703L0807F14

Original ruling text

COMPTROLLER OF PUBLIC ACCOUNTS
STATE OF TEXAS
AUSTIN, 78774

BOB BULLOCK
Comptroller March 20, 1987

Dear ***:

Thank you for your letter of March 2, 1987 concerning the purchase of
oxygen, acetylene, etc. for industrial processing from COMPANY B.

These gases may be purchased tax free by issuing either an exemption
certificate (no number required) or a resale certificate (must include
permit number) if the gases are consumed during processing of an item for
resale. If the gases are used to perform a repair of tangible personal
property, the gases are supply items which do not qualify for exemption.
Rule 3.300 on Manufacturing and Rule 3.292 on Repairs are enclosed for
your
reference.

COMPANY B is not required to accept an exemption or resale certificate in
lieu of
collecting tax. Apparently COMPANY B will only accept resale
certificates. In
order to issue a resale certificate, a seller of taxable items must hold
a
valid sales tax permit for Texas or another state. Please refer to Rule
3.285 Resale Certificates.

COMPANY A's sales tax permit was not issued because of problems with the
corporation's franchise tax returns. A permit has now been issued
(#***) and resale certificates may be issued to suppliers, if
appropriate.

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

If you have any questions or need more information, please call me at
1-800-252-5555 toll free from anywhere in Texas. The regular number is
512/463-4600. You may write me at the Tax Administration Division.

Sincerely,
Julie Pesl
Tax Policy Section
Tax Administration Division