Tax Type
Retail Sales and Use Tax
Description
Scrap metal processors
Topic
Exemptions
Date Issued
06-18-1984
June 18, 1984
Re: Ruling Request: Sales and Use Tax
Dear ****
This will reply to your letters of February 14 and March 6, 1984 con-cerning exemption of industrial materials from sales and use tax.
Facts
***** (the "Company") buys and sells ferrous and nonferrous metals and, in season, botanical herbs and raw furs. The Company is licensed in Virginia as a scrap metal processor and pays insurance premiums as such. The Company estimates that scrap metals represent 95 to 98% of its volume of materials processed. Machinery, liquid oxygen and propane are used in the process as follows: scrap iron is prepared and cut with torches and alligator shears for shipment for remelting. Torches are used to clean radiators, stainless steel and zinc. Alligator shears are used to cut copper, and balers compact tin and loose aluminum into baled blocks. A machine separates and flattens aluminum cans. Forty percent of the expense incurred in the metals is found in the cost of processing supplies.
Determination
A business is not subject to retail sales or use tax with respect to certain types of tangible personal property if the business is manufacturing or processing products for sale or resale and the production is industrial in nature. Industrial processing includes but is not limited to those businesses classified in codes 20 through 39 of the Standard
Industrial Classification Manual published by the U. S. Department of Commerce and those businesses substantially similar to classified businesses. I have previously ruled that the processing of scrap metal is an industrial process and as such is entitled to the sales and use tax exemption provided by Va. Code § 58-441.6.
The exemption extends only to tangible personal property used directly in the processing operation, and includes machinery and tools and their repair parts, raw materials, materials used for packaging for shipment or sale, fuel, power, energy, and gas, electricity or water received through mains, lines or pipes. In the Company's case, this would appear to apply to the liquid oxygen, propane, torches, alligator shears, balers and machinery (for separating and flattening aluminum cans).
Sincerely,
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner