Does a 'Vapor Scrubber' that controls pollution while a finished product is in storage (after manufacturing is complete) qualify for the Texas manufacturing pollution-control exemption?

Plain-English summary

A manufacturer asked the Comptroller about the taxability of pollution control equipment in two situations, following an earlier law change (House Bill 1855, effective October 1, 1997) that narrowed the manufacturing exemption to property directly causing a change in the product being made.

Pollution control equipment inside the process area still qualifies for exemption after the 1997 narrowing, as long as it's used to control or contain pollution resulting from the manufacturing process itself. The 1997 amendment specifically excluded from the exemption (1) intraplant transportation equipment like pipes or conveyors that move product/raw material (unless the pipe is a component of a single piece of exempt equipment), and (2) equipment or supplies used to maintain or store tangible personal property.

A "Vapor Scrubber" used after the process is complete — the taxpayer's specific example, a unit that removes vapors from a finished product while it's in storage and returns them to the process (required to avoid an air-quality violation) — does NOT qualify for exemption. The reasoning: the exemption under Tex. Tax Code § 151.318(a)(5) only covers equipment used or consumed in the actual manufacturing, processing, or fabrication of the product; because the Vapor Scrubber operates on the product during storage, after manufacturing has already finished, it falls into the excluded "equipment used to maintain or store tangible personal property" category rather than the exempt "used in the actual manufacturing process" category — even though the scrubber is legally required for environmental compliance.

Currency note carried in the letter itself: the Comptroller flagged, right at the top of this letter, that § 151.318(a)(5)'s language was later amended by House Bill 3211 (76th Legislature, effective September 1, 1999 — less than a year after this letter issued) to replace "machinery, equipment, and repair parts" with the broader term "tangible personal property." That's a real statutory change to the exact provision this letter interprets, so this letter's specific storage-equipment-is-taxable conclusion may not fully reflect how the amended, broader statutory language would apply to the same facts today.

What this means for you

Manufacturers with required pollution-control equipment

Equipment controlling pollution during your actual manufacturing process stays exempt, but equipment addressing pollution after the product is finished and sitting in storage (even if required by law) is treated as storage-related equipment, which is excluded from the manufacturing exemption. Where in your process timeline the equipment operates — not just whether it's environmentally required — determines the tax result under this letter's reasoning.

Accountants and tax professionals

Watch the legislative history here: House Bill 1855 (1997) first narrowed the pollution-control exemption, and this letter applies that narrower version. But House Bill 3211 (1999) changed the operative statutory language from "machinery, equipment, and repair parts" to "tangible personal property" — a scope change that postdates this letter and should be checked against current Comptroller guidance before relying on this letter's specific storage-equipment holding today.

Common questions

Q: Does pollution control equipment used during manufacturing qualify for exemption?
A: Yes, per this letter, as long as it's used within the actual manufacturing process to control or contain pollution resulting from that process.

Q: Does a Vapor Scrubber used on a product already in storage qualify?
A: No, per this 1998 letter — it's used after manufacturing is complete, which falls under the "equipment used to store tangible personal property" exclusion, even though it's legally required for environmental compliance.

Q: Has the law changed since this letter was issued?
A: Yes — the letter itself flags that Sec. 151.318(a)(5) was amended by House Bill 3211, effective September 1, 1999, replacing "machinery, equipment, and repair parts" with "tangible personal property." Check current guidance before relying on this letter's specific conclusion.

Citations and references

Statutes and rules:

• Tex. Tax Code § 151.318(a)(5) (pollution control exemption for equipment used in the actual manufacturing process)
• House Bill 1855, 75th Legislature (eff. 10/01/1997) (narrowed the manufacturing exemption generally)
• House Bill 3211, 76th Legislature (eff. 09/01/1999) (amended § 151.318(a)(5)'s wording to "tangible personal property" — postdates and may affect this letter's holding)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9810941L

Original ruling text

Alert: The statutory language of 151.318(a)(5) relating to pollution control was amended to to replace the words "machinery, equipment, and repair parts" with "tangible personal property". HB3211 (effective 9-1-99) 76th Regular legislative session.

October 29, 1998

Subject: Pollution Control Equipment

Dear **:

This is in response to your request for a ruling regarding pollution control

equipment in light of HB 1855. You asked what is the taxability concerning the

following:

Item 1. Pollution control equipment located within the process area.

Response: Pollution control equipment used to control or contain pollution

resulting from a manufacturing process still qualifies for exemption from tax

after October 1, 1997.

The amendment to 151.318, states in part:

The amendment specifically excludes from the exemption (makes taxable) the

following:

• intraplant transportation equipment, including pipes or conveyors, used to

move a product or raw material in connection with the manufacturing process

(unless the pipe is a component part of a single piece of exempt manufacturing

or pollution control equipment ), and

• equipment or supplies used to maintain or store tangible personal property.

Item 2. Pollution control equipment, required by government, to protect the

environment, after the process is complete. As an example, a "Vapor Scrubber"

unit, which removes vapors from a product being stored and returns these vapors

back into the process. Without this process, releases would be made into the

air and would be considered a violation.

You have reviewed STAR's and find no recent discussions which have proved

helpful. You have searched especially for recent documents concerning

pollution control. You have also noted, many of the microfiche documents are

indicated as current but contain outdated information.

Response: The Vapor Scrubber does not qualify for exemption as it is not used

during the actual manufacturing, processing, or fabrication of tangible

personal property for ultimate sale, but rather is used to control pollution

resulting from storage of finished product. Texas Tax Code 151.318 (a)(5)

provides:

machinery, equipment, and replacement parts or accessories used or consumed in

the actual manufacturing, processing, or fabrication of tangible personal

property for ultimate sale if their use or consumption is necessary and

essential to a pollution control process.

This opinion is based on the facts presented. Other facts though similar may

provide a different result.

I hope this information answers your questions. If you need additional

information, please call me toll-free at 1-800-531-5441, extension 3-4502. The direct line is

512/463-4502. You may also write to Tax Policy Division, Comptroller of Public

Accounts. You may also e-mail our tax help section at:

Sincerely,

Gilbert Zamora

Tax Policy Division