After spending 3 hours adding the line: exclude: ['./src/assets/sass'] in 20 different places, I am seeking guidance on where it should actually be placed. Below is my current setup for the css-loader (util.js):

'use strict'
const path = require('path')
const config = require('../config')
const ExtractTextPlugin = require('extract-text-webpack-plugin')
const packageConfig = require('../package.json')

exports.assetsPath = function (_path) {
  const assetsSubDirectory = process.env.NODE_ENV === 'production'
    ? config.build.assetsSubDirectory
    : config.dev.assetsSubDirectory

  return path.posix.join(assetsSubDirectory, _path)
}

exports.cssLoaders = function (options) {
  options = options || {}

  const cssLoader = {
    loader: 'css-loader',
    options: {
      sourceMap: options.sourceMap
    }
  }

  const postcssLoader = {
    loader: 'postcss-loader',
    options: {
      sourceMap: options.sourceMap
    }
  }

  // generate loader string to be used with extract text plugin
  function generateLoaders (loader, loaderOptions) {
    const loaders = options.usePostCSS ? [cssLoader, postcssLoader] : [cssLoader]

    if (loader) {
      loaders.push({
        loader: loader + '-loader',
       
        options: Object.assign({}, loaderOptions, {
          sourceMap: options.sourceMap
        })
      })
    }

   
    if (options.extract) {
      return ExtractTextPlugin.extract({
        use: loaders,
        fallback: 'vue-style-loader'
      })
    } else {
      return ['vue-style-loader'].concat(loaders)
    }
  }

  
  return {
    css: generateLoaders(),
    postcss: generateLoaders(),
    less: generateLoaders('less'),
    sass: generateLoaders('sass', { indentedSyntax: true }),
    scss: generateLoaders('sass'),
    stylus: generateLoaders('stylus'),
    styl: generateLoaders('stylus')
  }
}


exports.styleLoaders = function (options) {
  const output = []
  const loaders = exports.cssLoaders(options)

  for (const extension in loaders) {
    const loader = loaders[extension]
    output.push({
      test: new RegExp('\\.' + extension + '$'),
     
      exclude: ['./src/assets/sass'],
      use: loader
    })
  }

  return output
}

exports.createNotifierCallback = () => {
  const notifier = require('node-notifier')

  return (severity, errors) => {
    if (severity !== 'error') return

    const error = errors[0]
    const filename = error.file && error.file.split('!').pop()

    
    notifier.notify({
      title: packageConfig.name,
      message: severity + ': ' + error.name,
      subtitle: filename || '',
      icon: path.join(__dirname, 'logo.png')
    })
  }
}

Here is an overview of my base webpack file:

'use strict'
const path = require('path')
const utils = require('./utils')
const config = require('../config')
const vueLoaderConfig = require('./vue-loader.conf')

function resolve (dir) {
  return path.join(__dirname, '..', dir)
}



module.exports = {
  context: path.resolve(__dirname, '../'),
  entry: {
    app: ['babel-polyfill','./src/main.js']
  },
  output: {
    path: config.build.assetsRoot,
    filename: '[name].js',
    publicPath: process.env.NODE_ENV === 'production'
      ? config.build.assetsPublicPath
      : config.dev.assetsPublicPath
  },
  resolve: {
    extensions: ['.js', '.vue', '.json'],
    alias: {
      'vue$': 'vue/dist/vue.esm.js',
      '@': resolve('src'),
    }
  },
  module: {
    rules: [
      {
        test: /\.vue$/,
        loader: 'vue-loader',
        options: vueLoaderConfig
      },
      {
        test: /\.js$/,
        loader: 'babel-loader',
        include: [resolve('src'), resolve('test'), resolve('node_modules/webpack-dev-server/client')],
      },
      
      {
        
      
      {
        test: /\.(png|jpe?g|gif|svg)(\?.*)?$/,
        loader: 'url-loader',
        options: {
          limit: 10000,
          name: utils.assetsPath('img/[name].[hash:7].[ext]')
        }
      },
      {
        test: /\.(mp4|webm|ogg|mp3|wav|flac|aac)(\?.*)?$/,
        loader: 'url-loader',
        options: {
          limit: 10000,
          name: utils.assetsPath('media/[name].[hash:7].[ext]')
        }
      },
      {
        test: /\.(woff2?|eot|ttf|otf)(\?.*)?$/,
        loader: 'url-loader',
        options: {
          limit: 10000,
          name: utils.assetsPath('fonts/[name].[hash:7].[ext]')
        }
      }
    ]
  },
  node: {
    
    setImmediate: false,
    
    dgram: 'empty',
    fs: 'empty',
    net: 'empty',
    tls: 'empty',
    child_process: 'empty'
  }
}

And here is the vue-webpack file:

'use strict'
const utils = require('./utils')
const config = require('../config')
const isProduction = process.env.NODE_ENV === 'production'
const sourceMapEnabled = isProduction
  ? config.build.productionSourceMap
  : config.dev.cssSourceMap

module.exports = {
  loaders: utils.cssLoaders({
    sourceMap: sourceMapEnabled,
    extract: isProduction
  }),
  cssSourceMap: sourceMapEnabled,
  cacheBusting: config.dev.cacheBusting,
  transformToRequire: {
    video: ['src', 'poster'],
    source: 'src',
    img: 'src',
    image: 'xlink:href'
  }
}

I believe the requested line should be inserted into one of these files, however, its absence seems to be hindering webpack from building properly.