Does a ready-mix concrete reclaimer — equipment that washes and separates sand and gravel out of waste ready-mix concrete so it can be reused — qualify for Texas's manufacturing equipment sales tax exemption?

Plain-English summary

A ready-mix concrete producer asked the Comptroller whether its concrete reclaimer equipment qualified for the Texas manufacturing equipment sales tax exemption. The reclaimer recovers sand and gravel from waste ready-mix concrete that gets returned to the plant in mixer trucks — concrete that, without this equipment, would just be dumped on a waste pile since ready-mix concrete only has a four-hour useful life before it can't be used.

The reclaimer works in stages: water is added to the returned waste concrete to loosen it up while still in the mixer truck; the mixture then enters the front of the reclaimer, where spent cement is washed away from the aggregate and sent to a slurry pit; the remaining aggregate moves to the rear section, where washing and screening separate the sand from the gravel; and finally the sand is de-watered and discharged separately from the gravel.

The Comptroller ruled that washing and separating manufactured aggregate so it can be reused in concrete production is considered part of the manufacturing process. The reclaimer qualifies for the manufacturing exemption as long as it is an integrated piece of equipment whose primary purpose is a direct manufacturing process. If that's the case, the buyer can give the vendor a properly completed exemption certificate instead of paying tax on the equipment. The Comptroller pointed to Texas Tax Code Sec. 151.318 and 151.3111 as the applicable manufacturing-equipment provisions.

What this means for you

Ready-mix concrete producers

If you use equipment to recover and reprocess sand and gravel from returned or waste concrete so those materials go back into making new concrete, that reclaiming step counts as part of your manufacturing process — not just waste handling or disposal. That means the reclaimer itself can be purchased tax-free with a properly completed exemption certificate, provided it's an integrated unit whose main job is a direct manufacturing step.

Equipment vendors and manufacturers of reclaimers

Sellers of this type of recycling/washing equipment to ready-mix producers should be prepared to accept a manufacturing exemption certificate in lieu of collecting tax, when the buyer's equipment and use fit this fact pattern.

Accountants and tax professionals

This letter is a useful example of how the Comptroller extends the manufacturing exemption to equipment that reclaims and reprocesses a manufacturer's own byproduct material for reuse in production, rather than equipment used purely for waste disposal. The key test stated here is whether the equipment is "an integrated piece of equipment whose primary purpose is a direct manufacturing process."

Common questions

Q: Does a concrete reclaimer qualify for Texas's manufacturing exemption?
A: Yes, according to this letter — provided it is an integrated piece of equipment whose primary purpose is a direct manufacturing process, since washing and separating manufactured aggregate for reuse in concrete production is part of the manufacturing process.

Q: What does the reclaimer actually do?
A: It adds water to waste ready-mix concrete in the mixer truck, separates spent cement from aggregate using water (sending the cement to a slurry pit), then washes and screens the aggregate to separate sand from gravel, and finally de-waters and discharges the sand separately from the gravel.

Q: What should the buyer do if the equipment qualifies?
A: Give the vendor a properly completed exemption certificate in lieu of paying tax.

Q: What statutes does the Comptroller point to?
A: Texas Tax Code Sec. 151.318 and 151.3111, both described as applicable to manufacturing equipment.

Q: Can this taxpayer's competitor rely on this same letter for their own reclaimer?
A: Not necessarily — the opinion is based on the facts presented, and the letter notes that if there are additional or different facts, the opinion may change.

Citations and references

• Tex. Tax Code Sec. 151.318 (manufacturing exemption)
• Tex. Tax Code Sec. 151.3111 (services on exempt manufacturing equipment)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9606523L

Original ruling text

June 10, 1996

Dear ***:

Thank you for your letter dated June 4, 1996, concerning the exemption provided
for certain machinery and equipment used in manufacturing. The literature you
provided on the equipment was most helpful.

Facts: The equipment is a ready-mix concrete reclaimer. The purpose of the
equipment is to recover the sand and gravel from waste ready-mix concrete
returned to the plant in mixer trucks. Currently, when concrete is returned to
the plant, it is dumped onto a waste area for later breakup and disposal.
Concrete ready-mix concrete has a four hour useful life.

The operation of the reclaimer involves the following:

Addition of water into the waste ready-mix to produce a 6" slump or better
while it is still in the mixer truck.

The mixture is introduced into the front of the reclaimer where spent cement is
separated from aggregates by means of water and sent to a slurry pit.

The aggregates are carried to the rear section of the reclaimer where washing
and screening separates the sand from the gravel.

The sand is then de-watered and separately discharged from the gravel at the
back of the unit.

You are requesting a determination of the taxability of concrete reclaimer.

Comptroller Response: Washing and separating manufactured aggregate so that it
can be re-used in the concrete production is considered part of the
manufacturing process. The equipment qualifies for the manufacturing exemption
if it is an integrated piece of equipment whose primary purpose is a direct
manufacturing process. If this is the case, you may give a properly completed
exemption certificate in lieu of tax to the vendor.

I am enclosing copies of Texas Tax Code Sec. 151.318 and 151.3111 which are
applicable to manufacturing equipment.

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

Please call me if you have any questions or need more information. Our toll
free number is 1-800-531-5441, and my extension is 5-0330. The direct line is
512/475-0330. You may also write to Tax Policy Division, Comptroller of Public
Accounts.

Sincerely,

Bettie Peterson
Tax Policy Division