Tax Type
Retail Sales and Use Tax
Description
Meat refrigeration partitions
Topic
Taxability of Persons and Transactions
Date Issued
10-26-1988
October 26, 1988
Re: Virginia Code §58.1-1821 Application
Retail Sales and Use Tax
Dear********************
This is in reply to your letter of March 29, 1988 in which you make application for correction of the department's recent sales and use tax assessment issued to your company,
FACTS
*********** (Company) is a wholesale processor of meat products. A part of the process involves aging the meats in a refrigerated building. Various types of meats require different temperatures and different humidity levels. In order to segregate the different types of meats and to maintain different temperatures and different humidity levels, the meats are placed into separate chambers within the refrigerated building. These separate chambers are created through the arrangement of insulated partitions. These partitions are steel-clad, insulated panels approximately seven inches thick. They are attached to hooks and operate on a tract which is not a part of the floor. It is possible to move the partitions to change the configuration of the chambers within the refrigerated building.
The business which leased these panels to the Company did not collect tax on the rental of these panels to the Company. You contest the department's assessment of use tax on the rental of these panels, contending that these panels are machinery and tools used to manufacture Your meat products.
DETERMINATION
Virginia Code §58.1-608.1 exempts from the sales and use tax "machinery or tools or repair parts therefor or replacements thereof, fuel, power, energy, or supplies, used directly in ... processing .... products for sale or resale." (Emphasis added.) Virginia Regulation (VR) 630-10-63 explains that "'used directly' refers to those activities that are an integral part of the production of a product, including all steps of an integrated manufacturing process, but not including incidental activities such as general maintenance, management and administration."
In order to produce Company's product (aged meats and meat products) it is necessary to provide an environment conducive to proper curing of each type of meat. This is accomplished by the use of the insulated panels. These panels are used to maintain different temperatures and different humidity levels necessary to cure the meat. Without these panels, Company could not produce the separate environments required by each different type of meat.
Based upon the information that you have provided, I find that these insulated panels are "used directly" by Company in processing its products for sale. Accordingly, the lease of these same panels is exempt from the tax. The assessment will be adjusted accordingly.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner