Texas Sales Tax Exemptions on Manufacturing machinery natural gas and data centers
Texas businesses are exempt from state sales and use tax on specific expenses, including manufacturing machinery & equipment, natural gas & electricity, and certain data center expenses.
Manufacturing Machinery & Equipment
Leased or purchased machinery, equipment, replacement parts, and accessories used in manufacturing, processing, fabricating, or repairing tangible personal property for sale are exempt from state and local sales and use tax. Additionally, labor costs associated with the construction of new facilities are also tax-exempt.
Businesses engaged in agriculture are exempt from state sales and use tax on machinery exclusively used for processing, packing, or marketing agricultural products, provided these activities occur at a facility operated by the original producer.
Natural Gas & Electricity
Texas businesses are exempt from state and local sales and use tax on electricity and natural gas used in manufacturing, processing, or fabricating tangible goods. To qualify, a business must conduct a predominant use study proving that at least 50% of the electricity or natural gas consumption directly contributes to physical changes in a product.
Data Center Exemption
Texas offers a 100% sales tax exemption on purchases of computers, equipment, cooling systems, power infrastructure, electricity, and fuel for eligible data centers. To qualify, a data center must meet minimum investment and employment thresholds, including:
- A capital investment of at least $200 million
- Creation of at least 20 new jobs
- An average salary of at least 120% of the county’s average salary
These exemptions aim to support manufacturing, agriculture, and technology industries by reducing operational costs and encouraging business growth in Texas.
Texas Sales Tax Exemptions on Manufacturing machinery natural gas and data centers
