Tax Incentives
Manufacturing Exemptions
Tangible Property
State sales and use tax exemptions are available to taxpayers who manufacture, fabricate or process tangible property for sale. The exemption generally applies to tangible personal property involved in the manufacturing process.
Benefit
Exemption from state sales and use tax.
Eligibility
Who is eligible: A taxpayer who manufactures, fabricates or processes tangible personal property for sale; repairs tangible personal property from their own inventory for sale (rebuilders); or repairs tangible personal property from their own inventory for rental.
What is exempt: Tangible personal property that becomes an ingredient or component of an item manufactured for sale, as well as taxable services performed on a manufactured product to make it more marketable.
The exemption also applies to tangible personal property that makes a chemical or physical change in the product being manufactured and is necessary and essential in the manufacturing process. Some items, such as hand tools, are excluded from the exemption.
For a full explanation of what is and is not exempt, visit the Comptroller's website.
Administration
Tangible property manufacturing exemptions are administered through the Comptroller of Public Accounts. For more detailed information, click here.
Natural Gas & Electricity
Texas manufacturing companies may be exempt from paying state sales and use tax on electricity and natural gas used in manufacturing, processing, or fabricating tangible personal property.
Benefit
Sales tax exemption on qualifying natural gas and electricity purchases.
Eligibility
A manufacturing company must complete a "predominant use study" that shows that at least 50 percent of the electricity or natural gas consumed by the business is used directly in the manufacturing process.
Administration
Natural gas and electricity manufacturing exemptions are administered through the Comptroller of Public Accounts. For more detailed information, click here.
