Battling Drought – Sales Tax Exemptions for Items Used to Enhance the Availability of Water

The severe drought covering most of the state has prompted many Texans to examine ways to save water. Similarly, the rising cost of living has many of us looking for ways to save money. The sales tax exemptions authorized under Tax Code Section 151.355 can help with both objectives.

An exemption applies to equipment, supplies and/or services used solely for certain types of water conservation. For the purpose of exemption, “solely” means the equipment, supplies or services are used exclusively for the reason stated. Items that do not meet the “sole purpose test” are not exempt. For example, a toilet (even a low-water-use toilet) does not qualify for the exemption since it is not solely used to reduce or eliminate water use. But, a water dam in a toilet tank is only used to save water, so it qualifies for the exemption.

Other items that do not meet the “sole purpose test” and are subject to tax include:

  • artificial turf;
  • lawnmowers;
  • low-flush toilets;
  • pumps for fountains or water displays;
  • shredders;
  • tools used for landscaping or lawn care;
  • water-efficient appliances; and
  • water hoses.

What Conservation Activities Are Exempt?

The exemption applies to equipment, supplies and services used solely in the types of conservation activities listed below.

Rainwater Harvesting

Equipment, supplies and services used solely for capturing and storing rainwater for subsequent use are exempt from sales tax, including:

  • rainwater filtration equipment;
  • purification equipment;
  • rain barrels;
  • gutters used solely to route the water into rain barrels or rainwater collection systems;
  • tanks and cisterns;
  • roof washers used in a harvesting systems;
  • screens and filters for the gutters, barrels, tanks, cisterns and roof washers; and
  • a collection surface area that is not used as a roof of a structure or storage area.

Piping, plumbing or sprinkler systems used to distribute water inside a house or other structure or throughout a yard or other grounds are not considered part of rainwater harvesting equipment and are not exempt.

Water Recycling and Reuse

Equipment, services and supplies used solely to capture and recycle water qualify for exemption, including:

  • pipes;
  • pumps;
  • chemicals;
  • tanks;
  • cisterns; and
  • water recycling systems for washing machines.

Reduction or Elimination of Water Use

Equipment, services and supplies used solely to reduce or eliminate water use qualify for exemption, including:

  • water dams for toilets;
  • timers and rain sensors attached to sprinkler systems;
  • water displacement devices for toilet tanks; and
  • faucet sensors that shut off water flow.

Items such as low-flow showerheads, xeriscaping services, native and drought-resistant plants, rock gardens and artificial turf do not qualify since they are not used solely to reduce water use.

Desalination of Surface Water or Groundwater

“Desalination” is the process of removing salts from undrinkable or brackish surface water or groundwater to obtain useable fresh water or high-quality drinking water.

Equipment, services and supplies used solely for desalination qualify for exemption, including:

  • reverse osmosis systems;
  • cleaning and pickling valves;
  • filters;
  • membranes;
  • pre-filter pumps;
  • product flow meters;
  • salinity meters; and
  • high-pressure control valves

Brush Control Designed to Increase the Availability of Water

“Brush control” is the selective control, removal or reduction from watershed rangelands of mesquite, prickly pear, salt cedar or other deep-rooted woody plants to enhance the availability of water.

Equipment, services and supplies used solely for brush control are exempt from sales tax, including:

  • bulldozers;
  • root plows;
  • crawler tractors;
  • hydro axes;
  • chains;
  • roller choppers;
  • aerial sprayers;
  • sling blades;
  • oil;
  • batteries;
  • herbicides; and
  • repair services performed on brush control equipment.

Precipitation Enhancement

“Precipitation enhancement” is an activity, such as cloud seeding, done to artificially induce rain clouds to produce rain.

Purchases of equipment, services and supplies used solely for precipitation enhancement are exempt from sales tax, including:

  • end-burning cloud-base flares;
  • acetone solution wing-tip generators;
  • pressure transducers; spectrometer probes;
  • calibration equipment.

Water or Wastewater Systems

Equipment, services and supplies used to construct or operate a water or wastewater system certified by the Texas Commission on Environmental Quality (TCEQ) as a regional system and water or wastewater systems constructed or operated as a public-private partnership qualify for exemption.

The exemption also covers a water supply or wastewater system built or operated by a private entity if the system is certified by a political subdivision or by a non-profit water supply corporation created and operated under Chapter 67 of the Texas Water Code. See Rule 3.318 regarding water-related exemptions and Water and Wastewater Systems (Pub. 94-123) (PDF, 1004KB).

Fracturing at an Oil or Gas Well

Production and completion of oil or gas wells can sometimes require fracturing, which requires injecting a large volume of water into the well to fracture rock formations and release the oil or gas. Recycling and reusing the recovered contaminated wastewater reduces the amount of fresh water used in oil and gas drilling.

Equipment and supplies specifically used to process, reuse or recycle the wastewater resulting from the fracturing at an oil or gas well qualify for sales tax exemption.

The purchaser of qualifying items used for the sole purpose of water conservation or reuse must present to the seller a Texas Sales and Use Tax Exemption Certificate (Form 01-339) (PDF, 57KB) stating valid qualifications for the exemption. The certificate must also show the purchaser’s name and address; description of the item; the reason the purchase is tax exempt; the purchaser’s signature; the date; and the seller’s name and address.

*Originally published in the June edition of Tax Policy News – a monthly newsletter about Texas tax policy at

Leave a Reply