Are thermometers and timers used in food processing exempt from Texas sales tax as manufacturing/quality-control equipment?

Plain-English summary

A food processor had earlier asked the Comptroller about the sales tax exemption for manufacturing equipment and, after the Texas Legislature clarified the exemption through House Bill 3211, followed up specifically about thermometers used in food processing. The Comptroller's answer draws a precise line: thermometers and timers used in an actual quality control process during manufacturing are exempt, but thermometers used only to check that food is being stored safely are not.

Specifically exempt: hand-held probe thermometers that check the temperature of food as it's being processed, shelf-type oven thermometers that monitor cooking temperature, and timers used in food processing. Not exempt: shelf-type thermometers used only to confirm that a freezer or refrigerator is at a safe storage temperature before or after processing -- because that's a storage function, not part of the manufacturing/quality-control process itself.

The letter also flags a refund opportunity: because H.B. 3211 clarified (rather than newly created) this exemption, the taxpayer's customers may have paid sales tax in error on qualifying equipment purchased going back to October 1, 1997, and could be entitled to a refund.

What this means for you

Food and meat processors/manufacturers

Track which of your temperature-monitoring equipment is used to check the food or process itself (exempt) versus storage conditions only (taxable). The same-looking shelf thermometer can fall on either side of the line depending on what it measures.

Businesses that already paid tax on this equipment

If you bought quality-control thermometers or timers for food processing since October 1, 1997, and paid sales tax, you may be able to file a refund claim -- ask your seller for a refund or use the sales tax refund process directly with the Comptroller.

Accountants and tax professionals

The controlling concept is "necessary and essential to a quality control process" under the manufacturing exemption as clarified by H.B. 3211 (1997) -- the equipment must relate to production quality, not general storage or facility maintenance, to qualify.

Common questions

Q: Are all thermometers used in a food processing plant exempt from sales tax?
A: No. Only those used in the actual manufacturing/processing quality-control function (checking food temperature during processing, monitoring oven temperature during cooking) are exempt. Thermometers used just to verify safe freezer/refrigerator storage temperature are taxable.

Q: Are timers used in food processing exempt too?
A: Yes, per this letter, timers used in food processing qualify for the same quality-control exemption.

Q: Can I get a refund if I already paid tax on qualifying equipment?
A: Potentially, per this letter -- purchases since October 1, 1997 may have been taxed in error once H.B. 3211 clarified the exemption; check with the Comptroller's refund process.

Citations and references

Statutes:

• H.B. 3211, 76th Legislature (1997) (clarified the quality-control-process manufacturing exemption)
• Tex. Tax Code § 151.318 (manufacturing exemption)

Source

• STAR search: https://star.comptroller.texas.gov/search?doc_type_code=L&tax_type_code=SST
• Opinion: https://star.comptroller.texas.gov/view/9911965L

Original ruling text

November 30, 1999

Dear **:

On July 30, 1998, we responded to your questions concerning the sales tax
exemptions available for manufacturers. Since then, the Texas Legislature has
clarified those exemptions.

House Bill 3211 provides an exemption for tangible personal property used or
consumed during the actual manufacturing, processing, or fabrication of
tangible personal property for ultimate sale if the use or consumption of the
property is necessary and essential to a quality control process.

In your letter of July 30, 1998, you stated that you received a refund request
from a customer on purchases of thermometers used in food processing.
Thermometers that are used in a quality control process are exempt. The
hand-held probe thermometers used for determining the temperature of the food
being processed and the shelf-type thermometers for ovens used for determining
the temperature of the oven during cooking qualify for exemption. Timers used
in food processing also qualify for this exemption. However, the shelf-type
thermometers used to determine the actual temperature inside the
freezer/refrigerator is at safe levels to store food before or after being
processed do not qualify for exemption.

Based on this new information, you may want to review your customers request
for a refund on the equipment purchases since October 1, 1997, as they may have
paid tax in error. The enclosed refund information packet includes forms and
instructions on how to provide a sales tax refund. I have also enclosed a blank
exemption certificate for your convenience.

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

If you have any questions regarding the manufacturing exemptions, you may call
Al Van Allen toll free at 1-800-531-5441, ext. 34680. You may also write to Tax
Policy Division, Comptroller of Public Accounts.

Sincerely,

Nina Roberts
Tax Policy Division

cc: Al Van Allen