Texas Manufacturing Exempt Purchase Log Worksheet
Texas offers sales and use tax exemptions for certain tangible personal property used in manufacturing, but the burden of proof is on the buyer. This log gives accounts payable one place to record each exempt purchase, whether a certificate was given and how much tax would have applied.
| Invoice date | Vendor | Item purchased | Use | Treated as exempt | Certificate on file | Invoice amount before tax | Combined tax rate (%) | Tax avoided | |
|---|---|---|---|---|---|---|---|---|---|
$26,400 | |||||||||
$3,449 | |||||||||
$103 | |||||||||
$776 |
The Tax avoided column multiplies every row, so filter to rows marked Yes when quoting exposure. Texas rules on what qualifies as used directly in manufacturing are detailed and change by ruling. Verify with the Texas Comptroller and your adviser. This is a documentation aid, not tax advice.
Pull exempt purchases from your ERP
Optional: discuss a read-only report that lists purchases by tax code and GL account.
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How to use the log
Add a row for each material, equipment or repair purchase where you did not pay tax. Pick the use category, mark whether you treated it as exempt and whether a certificate was given to the vendor. Enter the combined local rate for the delivery location. Review rows flagged Review or with no certificate before your next audit. Export to Excel and keep the file with your tax records.
- Match each row to the invoice and purchase order number in your ERP
- Use the ship-to rate, not the headquarters rate
- Resolve every Review row each month
Texas rules in brief
The Texas state rate is 6.25 percent and local taxes can bring the combined rate up to 8.25 percent. Property used directly in manufacturing, processing or fabricating tangible personal property for sale can qualify for exemption, and so can certain raw materials that become part of the product. Items such as general office supplies and many facility costs do not qualify. Because the line between directly used and indirectly used is often disputed, treat this log as evidence, not a legal conclusion.
Reading the sample
The CNC mill and steel plate are marked exempt with a certificate on file. The break room supplies are taxable, so the correct treatment is to pay tax. The spindle repair parts are marked Review with no certificate, which is the row to resolve first: either obtain documentation or accrue use tax. The tax avoided column on that row shows the exposure if the exemption fails.
Common mistakes
Frequent audit findings include missing certificates, exempting maintenance supplies that do not qualify, using the wrong location rate and not accruing use tax on out-of-state purchases that arrive without tax. Build the log from a monthly AP report filtered on tax code, not from memory at audit time.
Frequently Asked Questions
Do I need an exemption certificate for every purchase?
Vendors generally need a properly completed certificate to justify not charging tax. Blanket certificates can cover repeat purchases from the same vendor in many cases, but confirm how long they remain valid.
What is use tax?
Use tax is the buyer's tax on taxable items bought without tax being charged, often from out of state vendors. It is due at the same rate as sales tax and is reported on your Texas return.
Are repair parts for production machines exempt?
It depends on how they are used and how the rules classify them. Treat them as Review items and get a clear answer before claiming exemption.
Does the sheet file my return?
No. It documents purchases to support your return. Filing is done through the Texas Comptroller system or by your preparer.
A scheduled report on tax code, vendor and GL account can feed this log directly from your ERP. We can build that with your AP and tax teams.
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