Does the Texas manufacturing exemption cover costumes, cameras, and other equipment used directly in producing a motion picture, video, or audio recording that will be sold, licensed, distributed, broadcast, or exhibited?

Subject

Wardrobe/Costume — Used In Motion Picture Production

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9312010L

Plain-English Summary

This 1993 letter actually bundles two pieces of correspondence: a follow-up reply from the Comptroller's office (Adina Whittemore, Tax Administration Division) about an exemption discussed in a "Sales Tax Update" article, and the original inquiry letter from a part-time video producer who wanted to know whether Tax Code Section 151.318 (Property Used in Manufacturing) applied to their work.

The Comptroller's answer describes a manufacturing-style exemption for the production of a video master (or motion picture or audio recording) where a copy will be sold, licensed, distributed, broadcast, or exhibited. Under this exemption, a producer could buy the following tax-free:

• Materials necessary and essential to, and used directly in, the production.
• Machinery, equipment, and accessories used directly in the production — but only if the item would be consumed and worthless within six months of purchase.
• Processing services such as film processing, voice-overs, Foley work, and editing.
• Machinery and equipment rented for use in the production (and if the rental itself was exempt, the associated transportation and damage-waiver charges were exempt too).

The letter specifically lists costumes as an example of exempt machinery/equipment used directly in the production process, alongside cameras and accessories, lights and accessories, microphones and accessories, and fog/wind machines. To claim the exemption, the buyer gave the seller an exemption certificate stating the item would be used directly in producing a motion picture, video, or audio recording that would be sold, licensed, distributed, broadcast, or exhibited.

The letter also lists a long set of items that did not qualify, including battery chargers, cars/trucks/vans/trailers, director's chairs, fuel for road use, gas cans, generators, ice chests, janitorial supplies, ladders, meals, mobile offices, pagers/cell phones (except those used exclusively on set), rakes, security services, shipping cases, shovels, sledgehammers, soft drinks, sun umbrellas, telecommunication service charges, waste removal, water coolers, and alcohol.

Finally, the letter addresses the producer's own charges: as producer, the client could give an exemption certificate to avoid tax on the charge for the finished master, but charges for "dubs" (copies) remained taxable unless the dubs would themselves be resold (in which case a resale certificate applied instead). If the master would never be sold, licensed, exhibited, broadcast, or distributed, no exemption could be claimed on rented production equipment, and the client owed tax on both the master and any dubs.

What This Means For You

Two ALERT banners at the top of this letter flag that the law has changed since 1993 — here is what that means in practice:

1. 1995 amendment to Section 151.318 (effective 1-1-95): This amendment expanded the general manufacturing exemption to allow a full, 100% exemption for manufacturing machinery and equipment (other than hand tools), with no requirement tied to how long the item would last ("without respect to useful life"). The 1993 letter you're reading, by contrast, describes a narrower rule — machinery and equipment only qualified if it would be "consumed and without value within six months" of purchase. That six-month/consumed-and-worthless condition described in this letter was tied to the pre-1995 version of the law. After January 1, 1995, that useful-life limitation was no longer part of Section 151.318, so the letter's description of that specific condition became outdated.

2. 1999 addition of Section 151.3185 (effective 10/1/1999): The legislature later created a Tax Code section specifically for the motion picture industry, separate from the general manufacturing exemption this 1993 letter relies on. That means the legal basis for exempting items like costumes, cameras, and production equipment shifted from the general manufacturing statute (Section 151.318, as referenced in the producer's own inquiry letter) to a dedicated motion-picture provision. The reasoning in this 1993 letter — built entirely around the general manufacturing exemption — does not reflect that later, industry-specific statute.

Bottom line: The specific list of exempt and non-exempt items in this letter, and its "six months and worthless" test, reflected the law as it stood in December 1993. Both the general manufacturing exemption and the motion-picture-specific rules changed afterward, so this letter should be treated as a historical snapshot, not as current guidance on whether costumes or other production equipment qualify for exemption today.

Q&A

Q: According to this 1993 letter, were costumes exempt from Texas sales tax when used in motion picture production?
A: Yes — the letter lists "costumes" by name as an example of machinery and equipment used directly in the production process that could qualify for the exemption, alongside cameras, lights, microphones, and fog/wind machines.

Q: Did every piece of equipment used on a film set qualify for this exemption?
A: No. The letter states the exemption applied only to machinery and equipment used directly in the production process, and it lists many exclusions: office equipment, transportation equipment, motor vehicles, hand tools, equipment incidental to the production, and equipment used for video photography, plus a long list of specific non-qualifying items like generators, director's chairs, ladders, and communication devices (except those used exclusively on set).

Q: What condition did equipment have to meet to qualify for the exemption under this 1993 letter?
A: The equipment or machinery had to be "consumed and without value within six months from the day it was bought." Per the ALERT banner in this letter, that useful-life-based condition came from the pre-1995 version of Section 151.318; the 1995 amendment removed the useful-life limitation and allowed a full exemption "without respect to useful life."

Q: Does this letter still reflect current Texas law on the motion picture exemption?
A: Not necessarily. The letter itself carries two ALERT notices explaining that Section 151.318 was amended effective January 1, 1995, and that a new, motion-picture-specific statute, Section 151.3185, was added effective October 1, 1999. Both post-date this December 1993 letter, so its specific rules and six-month test should not be relied on without checking current law.

Q: What happened to charges for the finished "master" and copies ("dubs")?
A: The producer could use an exemption certificate to avoid tax on the charge for the master itself. Charges for dubs remained taxable unless the dubs would be resold, in which case a resale certificate applied. If the master was never going to be sold, licensed, exhibited, broadcast, or distributed, no exemption applied to rented production equipment, and the client owed tax on both the master and any dubs.

Original ruling text

ALERT: Section 151.318 was amended to allow 100% exemption on manufacturing machinery and equipment (excluding hand tools) without respect to useful life effective 1-1-95.

ALERT: Section 151.3185 was added to the Tax Code to specifically address the motion picture industry effective 10/01/1999.

December 21, 1993

Dear **:

I'm glad you take the time to read the "Sales Tax Update."

The new exemption extends to the production of a video master, a copy of which

will be sold or offered for ultimate sale, license, distribution, broadcast ox

exhibition. If you work on such a production you may claim tax exemptions when

purchasing the following items:

• materials necessary and essential to and used directly in the production,

• machinery and equipment and accessories used directly in the production if

the equipment or machinery will be consumed and without value within six months

from the day it was bought,

• processing, such as film processing, voice overs, Foley services, editing

• machinery and equipment rented for use in the production. (If the rental is

exempt, no tax is due on associated transportation and damage waiver charges.)

The exemption only applies to machinery and equipment used directly in the

production process. Examples include cameras and accessories, lights and

accessories, costumes, microphones and accessories, fog machines and wind

machines. This exemption does not include office equipment, transportation

equipment, motor vehicles, hand tools and equipment incidental to the

production or equipment used video photography.

To claim an exemption, give the retailer an exemption certificate stating the

equipment will be used directly in the production of a (one of the following)

motion picture, video or audio recording a copy of which will be (one or more

of the following) sold, licensed, distributed, broadcast or exhibited.

There are limitations on the manufacturing exemption. Here is a partial list of

the goods and services that do not qualify for the exemption:

Battery charger

Cars, trucks, vans, and trailers - purchases and rentals

Director's chair

Fuel purchased for use on the roads and highways

Gas can

Generator

Ice chest

Janitorial supplies or equipment

Ladder

Meals

Microwave link system (unless the system is rented to create special effects)

Mobile offices

Pagers, cellular phones, and other communication equipment (except those used

exclusively on the set)

Rake

Security services

Shipping case

Shovel

Sledge hammer

Soft drinks

Sun umbrella

Telecommunication services such as mobile phone charges

Waste removal (including waste that will be recycled)

Water cooler

Wine, beer, liquor

Your client is the producer. As the producer, your client may complete an

exemption certificate to claim an exemption from tax on your charge for the

master. Charges for dubs are still taxable, unless they will be resold. In that

case, your client will need to complete a resale certificate.

When a copy of the master tape will not be sold, licensed, exhibited, broadcast

or distributed, you may not claim a exemption on equipment rented for the

production, and your client owes tax on your charge for the master and any

dubs.

My number is 512/463-4614, if you have any questions.

Sincerely,

Adina Whittemore

Tax Administration Division

State Comptroller

Attn: Tax Policy

P. O. Box 13528

Austin, Texas 78711

Dear Sir:

I read in your most recent "Sales Tax Update" an article on ''Motion Picture

Producers". I am in the video production business but only on a part time

basis. I would like to know if I am entitled to any exemption through Tax Code

151.318, Property Used in Manufacturing. Could you please send me any

information that would explain this tax code further. My taxpayer number is

**. Thank you for your help.