Is equipment used in mining or quarrying (like screening equipment, shaker screens, front end loaders, sand screws, and gravel water pumps) exempt from Texas sales tax under the manufacturing exemption?

Plain-English summary

The Comptroller's Tax Policy Division answered a taxpayer's questions about how the sales/use tax manufacturing exemption applies to five specific pieces of equipment used in mining and quarrying operations, and about how the manufacturing exemption's multi-year phase-in schedule worked.

For the equipment, the dividing line the Comptroller drew again and again is whether the item is used before or after processing (crushing or grinding) begins:

• Screening equipment (used to classify and grade crushed material into usable, saleable sizes): taxable if used before processing starts; exempt if used to screen material after crushing has commenced.
• Shaker screens (remove dirt and rock before loading material into grinders, or remove contaminants after grinding): taxable when used before loading into the grinder; exempt when used to remove contaminants after the material goes through the grinder.
• Front end loaders (load unprocessed material into crushers, grinders, or shredders): taxable, because they're treated as intraplant transportation equipment rather than processing equipment.
• Sand screws (wash and/or sort aggregate materials): taxable when used before grinding commences; exempt when used afterward.
• Gravel water pumps (used to gather gravel from riverbed bottoms): taxable, because they're used to gather materials rather than to process them.

On the phase-in question, the letter confirms the manufacturing exemption for equipment was phased in over several years, with the refund/rate reduction on state sales tax depending on the equipment's purchase date:

• 1990 – September 30, 1991: 25% reduction
• October 1, 1991 – September 30, 1993: no sales tax reduction, but corporate taxpayers could be eligible for a franchise tax credit on the 1994 franchise tax return for state tax paid on the equipment
• October 1, 1993 – December 31, 1993: 50% reduction
• January 1, 1994 – December 31, 1994: 75% reduction
• January 1, 1995 forward: 100% exemption

Critically, the phase-in never applied to local sales tax — the full local tax remained owed on qualifying manufacturing machinery all the way through the phase-in period. It was only as of January 1, 1995 that qualifying manufacturing equipment became completely exempt from both state and local tax.

What this means for you

Mining, quarrying, and aggregate producers

If you buy or lease screening equipment, shaker screens, sand screws, or similar gear, the taxability doesn't hinge on the type of equipment alone — it hinges on where in the production sequence you use it. The same type of equipment can be taxable in one application (pre-processing) and exempt in another (post-processing) at the very same facility. Front end loaders and gravel-gathering pumps are treated as taxable regardless, because the Comptroller views loading/hauling/gathering as distinct from manufacturing or processing.

Businesses that purchased equipment in the early-to-mid 1990s

If you're reviewing old invoices or refund claims for manufacturing equipment bought between 1990 and 1994, remember the exemption was only partial during that window (25%, then a franchise-tax-credit option, then 50%, then 75%) and didn't reach 100% state exemption until January 1, 1995. Also remember that local tax was never reduced by the phase-in — it stayed fully taxable until the exemption became complete on January 1, 1995.

Accountants and tax professionals

When advising clients on Texas manufacturing exemption claims for aggregate/mining equipment, confirm (1) the equipment's function relative to the start of crushing/grinding, and (2) the purchase date against the phase-in schedule, since state and local tax treatment diverged until 1995.

Common questions

Q: Is screening equipment always exempt from Texas sales tax under the manufacturing exemption?
A: No. It's taxable if used before crushing has commenced, and exempt only once it's used to screen materials after crushing has begun.

Q: Are front end loaders used to feed crushers or grinders exempt?
A: No. The Comptroller treats them as taxable intraplant transportation equipment, not exempt processing equipment.

Q: Why would a gravel water pump be taxable if it's used in a quarrying operation?
A: Because it's used to gather gravel from riverbeds, not to process material — gathering/collecting equipment doesn't qualify for the manufacturing exemption the way processing equipment can.

Q: What was the manufacturing exemption phase-in schedule?
A: 25% (1990 – Sept. 30, 1991), no sales tax reduction but a possible franchise tax credit (Oct. 1, 1991 – Sept. 30, 1993), 50% (Oct. 1 – Dec. 31, 1993), 75% (all of 1994), and 100% starting January 1, 1995.

Q: Did the phase-in reduce local sales tax too?
A: No. The phase-in exemption applied only to state tax. Local tax remained fully due on qualifying equipment until January 1, 1995, when the equipment became completely exempt from both state and local tax.

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9512228L

Original ruling text

December 11, 1995

Dear **:

On December 7, 1995, you asked for clarification of the manufacturing exemption

as it applied to several items of equipment. Your concerns involved the

following pieces of equipment:

1. Screening equipment - commonly used to classify and grade crushed material

into usable and saleable sized products.

Answer: Screening equipment is taxable if it is used before processing has

commenced. It is exempt if it is used to screen materials after the crushing

has commenced.

2. Shaker screens - used to remove dirt and rock before loading materials into

grinders. Also used to remove contaminants after going through the grinder.

Answer: Shaker screens are taxable when used to remove dirt and rock before

loading materials into the grinders. They are exempt when used to remove

contaminants after going through the grinder.

3. Front end loaders - used to load unprocessed material into crushers,

grinder, or shredder.

Answer: Front end loaders are taxable as intraplant transportation material.

4. Sand screws - used to wash and/or sort aggregate materials

Answer: Taxable when used before grinding commences, exempt when used

afterwards.

5. Gravel water pumps - used to gather gravel from riverbed bottoms.

Answer: Taxable as they are not used to process materials but merely gather

them.

Your understanding that the manufacturing exemption has been phased in over a

number of years is correct. The refund or reduction in the sales tax rate for

equipment purchased between the following dates were as follows:

1990 - September 30, 1991

25%

October 1, 1991 - September 30, 1993 No sales tax reduction, but corporate

taxpayers may be eligible to receive a franchise tax credit on the 1994

franchise tax return for state tax paid on the equipment

October 1, 1993 - December 31, 1993

50%

January 1, 1994 - December 31, 1994

75%

January 1, 1995 forward

100%

The manufacturing phase in exemption did not apply to local tax. Therefore, the

entire amount of local tax is owed on machinery qualifying for the phase-in

exemption until January 1, 1995. On January 1, 1995, qualifying manufacturing

equipment became totally exempt from both the state and local taxes.

I hope this satisfactorily answers your questions. Please contact me at 111 E.

17th Street, Austin, Texas 78774 should you need further information or

clarification.

Sincerely,

Wade Anderson

Director, Tax Policy

cc: Karey Barton, Manager, Tax Policy