Is an ultra pure water system and its associated piping, used to produce and distribute ultra pure water needed in semiconductor fabrication, exempt from Texas sales and use tax?

Plain-English summary

This is a short, direct follow-up letter. The taxpayer had previously written to the Comptroller in February 1996 with questions about cleanrooms and associated systems used in semiconductor (microchip) fabrication. This March 13, 1996 letter answers one specific follow-up question left over from that exchange: whether an ultra pure water system — meaning the system and the associated piping used to produce and distribute the ultra pure water required in the semiconductor fabrication process — is taxable.

The Comptroller's answer is brief and unambiguous: this system and its associated equipment are exempt under Tex. Tax Code Sec. 151.318(q). The letter points the taxpayer back to the answer given to "question two" in the earlier February letter for the fuller explanation, and simply confirms the exemption applies here too.

What this means for you

Semiconductor and microchip fabrication facilities

If your fabrication process depends on an ultra pure water system — the equipment and piping that produce and distribute the ultra pure water used in the fabrication process itself — this letter indicates the Comptroller treated that system, and its associated equipment, as exempt manufacturing equipment under Sec. 151.318(q), not as taxable general-purpose equipment or supply.

Businesses relying on a related, earlier ruling

This letter is a good reminder that STAR letters sometimes only make sense together with an earlier letter to the same taxpayer (here, a February 1996 letter about cleanrooms and associated systems). If you're trying to use this letter as guidance, keep in mind it doesn't restate the full reasoning — it simply confirms an earlier answer applies to the ultra pure water system as well.

Common questions

Q: Is an ultra pure water system used in semiconductor fabrication exempt from Texas sales and use tax?
A: According to this letter, yes — the Comptroller found the ultra pure water system and its associated equipment/piping exempt under Tex. Tax Code Sec. 151.318(q).

Q: Does the exemption cover just the water itself, or also the equipment and piping?
A: The letter confirms the exemption applies to "this system and the associated equipment" — i.e., the water-producing/distributing system and equipment, not merely the water as a separate purchased item.

Q: Can I rely on this letter for my own facility?
A: Only the taxpayer to whom this letter was directly issued can claim detrimental reliance on it. It's also a short, fact-specific answer tied to an earlier letter not included here, so a licensed Texas tax professional should confirm whether it applies to your situation.

Citations and references

Statutes and rules:

• Tex. Tax Code Sec. 151.318(q) (exemption basis cited for the ultra pure water system and associated equipment/piping used in semiconductor fabrication)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9603221L

Original ruling text

March 13, 1996

Dear **:

I think you'll find the answer to your question in the answer to question two
in my February letter concerning cleanrooms and associated systems.
Specifically you asked about the taxability of ultra pure water systems. You
defined the system as a system and the associated piping used to produce and
distribute ultra pure water required in the semiconductor fabrication process.

This system and the associated equipment are exempt under Sec. 151.318(q).

I hope this satisfactorily answers your questions. Should you have additional
questions, please contact me at 111 E. 17th Street, Austin, Texas 78774, or
call me at 1-800-531-5441, extension 3-4004.

Sincerely,

Wade Anderson
Director
Tax Policy