Tax Type
Retail Sales and Use Tax
Description
An item may be required by law, but does not qualify it for exemption.
Topic
Exemptions
Date Issued
11-08-1982
November 8, 1982
Re: 58-1118 Application: Sales and Use Tax
Dear ******************
This will reply to your correspondence of September 21, 1982, in which you apply for relief of sales and use tax and interest assessed against ********** as the result of an audit.
FACTS
**************operates a manufacturing plant producing cartons for various consumer products. Fire prevention equipment is attached to manufacturing equipment at the plant as there is a strong likelihood of flash fires in the manufacturing process. The fire prevention equipment was purchased separately from the manufacturing equipment and was added to the equipment at a later date. Such fire equipment is required by the plant's insurer, OSHA, and local fire codes. Due to such requirements, the manufacturing equipment cannot be operated unless the fire prevention equipment is attached. Taxpayer asserts that fire prevention equipment is an integral physical part or the manufacturing equipment and should be exempt as such from sales tax.
DETERMINATION
§ 58-441.6 of the Code of Virginia provides an exemption from sales and use tax for machinery purchased for use directly in industrial manufacturing. The term "used directly" is defined by Virginia Code § 58-44 1.3(q) as:
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- "Those activities which are an integral part of the production of a product, including all steps of an integrated manufacturing process, but not including ancillary activities such as general maintenance or administration."
Any personal property which does not meet this test will not qualify for a sales and use tax exemption. The fact that a particular item may be essential to a manufacturer's operation or the fact that an item may be required by local, state, or federal law is not sufficient on its own to qualify an item for exemption.
Fire protection equipment, while necessary for the manufacturing process is not used directly in such process. Therefore, I find no basis for granting relief from the tax assessed on this equipment. Payment of the assessment should be made immediately.
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner