200806105L



DATE:  June 16, 2008

TO:  Kevin Koller, Assistant Director, Tax Administration

FROM:  Lindey Osborne, Team Leader, Sales Tax Section, Tax Policy Area

RE:  Steel Mill Cooling Beds

You asked me to look into the taxability of cooling beds used in a steel mill. 

We understand that a particular steel mill in question obtains raw materials, 
generally recycled steel scrap such as crushed automobiles, and places the 
scrap into large furnaces to melt the steel into a molten state to form the 
products which are sold. Examples of the products sold include flat iron, angle 
iron, channel iron, concrete reinforcing bar and pipe. After being molded into 
the product desired, the red hot molten products are placed on a cooling bed to 
cool sufficiently for further processing to occur. 

The purpose of the cooling bed I researched is to control the rate of cooling 
of the metal products to prevent internal stresses, fractures and warping. 
Convection and radiation cooling occurs releasing heat above and below the 
product to produce the desired physical characteristics, such as hardness, 
symmetry and straightness. This is accomplished by laterally transporting and, 
in some cases, rotating the products slowly across the bed using metal strips 
spaced at close intervals with a saw tooth or stair step pattern cut into the 
metal strips. The cooling rate of the products on the cooling bed must be 
controlled to obtain the desired results and the cooling process is controlled 
by the bar spacing and speed at which the product moves. We also understand 
that the cooling bed in question is a piece of equipment separate and apart 
from any conveyors that solely transport the products in the manufacturing 
process.

Based on these facts, this type of cooling bed is not interplant transportation 
that would be subject to tax under Tax Code Section 151.318(c)(1). Any 
transportation that occurs on the cooling bed is part of the cooling process to 
ensure the product maintains its desired qualities such as hardness, 
straightness and is free of fractures or heat stresses, etc. A cooling bed of 
this sort is exempt under Tax Code Section 151.318(a)(2).




ACCESSION NUMBER: 200806105L
SUPERSEDED: N
DOCUMENT TYPE: L
DATE: 06/16/2008
TAX TYPE: SALES