Are water trucks used to control lime dust at a limestone processing facility, as mandated by the State of Texas, exempt from tax because they're used for pollution control?

Plain-English summary

A taxpayer asked the Comptroller's Tax Policy Division whether water trucks used to control lime dust — as mandated by the State of Texas — at a limestone processing facility are taxable. The trucks spray water to keep dust down, a pollution-control measure the state requires the company to carry out at its plants.

The Comptroller answered yes, the trucks are taxable. If the water trucks are designed to transport persons or property on the highway, they are motor vehicles, and motor vehicles are subject to motor vehicle tax rather than sales tax. Because of that, sales tax exemptions that apply to manufacturing equipment do not apply to these trucks. The letter is explicit that there is no exemption for motor vehicles based on their use in controlling pollution — the pollution-control purpose doesn't change the vehicle's tax treatment.

What this means for you

Limestone, lime, and other mineral-processing operators

If your facility uses water trucks (or similar highway-capable vehicles) to control dust as required by state environmental rules, don't assume that regulatory mandate or a pollution-control purpose exempts the vehicle from tax. This letter says plainly that no such exemption exists — the vehicle's classification as a highway-use motor vehicle controls, not its function at the plant.

Manufacturers relying on the manufacturing exemption

Texas's sales tax exemption for manufacturing equipment does not reach vehicles designed to transport persons or property on the highway. Those vehicles fall under motor vehicle tax instead, so equipment you might think of as "part of the manufacturing process" (like dust-control trucks) can still be taxed under a different tax entirely.

Accountants and tax professionals

When classifying dust-control or other pollution-abatement equipment at industrial sites, check first whether the equipment is a highway-capable motor vehicle. If so, this letter indicates it is taxed as a motor vehicle, and manufacturing sales-tax exemption analysis does not apply.

Common questions

Q: Are water trucks used for pollution control exempt from tax because they're required by state environmental rules?
A: No. The Comptroller found no exemption for motor vehicles based on their use in controlling pollution, even where the state mandates the pollution-control activity.

Q: Why are the water trucks taxed as motor vehicles instead of under sales tax?
A: Because they are designed to transport persons or property on the highway, which makes them motor vehicles subject to motor vehicle tax rather than sales tax.

Q: Can a manufacturing sales tax exemption apply to these trucks instead?
A: No. The letter states that because the trucks are subject to motor vehicle tax, sales tax exemptions applicable to manufacturing are not applicable to them.

Q: Can another taxpayer rely on this letter for their own facility?
A: No. STAR letters can generally be relied on only by the taxpayer to whom they were issued, and this letter's facts were specific to one company's limestone processing operation.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9512225L

Original ruling text

December 13, 1995

Dear **:

On December 12, 1995, you inquired about the taxability of water trucks used to
control pollution at **'s limestone processing facilities in Texas.
The State of Texas mandates that the company control air pollution at their
plants by spraying water to keep down the dust.

Your question is as follows:

Are water trucks used to control lime dust, as mandated by the State of Texas,
at a lime extraction facility taxable?

Answer: Yes. If the water trucks were designed to transport persons or property
on the highway, then the trucks are subject to motor vehicle tax and not sales
tax. Consequently, sales tax exemptions applicable to manufacturing are not
applicable. There is no exemption for motor vehicles based on their use in
controlling pollution.

I hope this satisfactorily answers your inquiry. Should you have any further
questions, please feel free to contact me.

Sincerely,

Wade Anderson
Director, Tax Policy

cc: Karey Barton, Manager, Tax Policy