Tax Type
Retail Sales and Use Tax
Description
Air vacuum system; Wood products manufacturing
Topic
Exemptions
Property Subject to Tax
Date Issued
04-12-1990
April 12, 1990
Re: §58.1-1821 Application/ Virginia Retail Sales and Use Tax
Dear******************
This will reply to your letter dated January 31, 1990 in which you seek the correction of the sales and use tax audit assessment dated May 20, 1987 for the period April 1984 through March 1987.
FACTS
**********(the taxpayer") contests the tax assessed on a vacuum system used in the taxpayer's manufacturing process. Previous correspondence from the Department's Technical Services Section dated March 2, 1988 stated that the taxpayer's air vacuum system did not qualify for the manufacturing exemption since the system is not used directly in manufacturing and processing a product, but rather it is a convenient and facilitative item used indirectly in the manufacturing operation. Furthermore, the audit findings did not conclude that the primary purpose of the vacuum system is to protect the integrity of the product.
The taxpayer is contesting the audit assessments with respect to the air vacuum system on the following points:
- The planers and molders used directly in the manufacturing process cannot operate without the concurrent use of the air vacuum system.
- The air vacuum system is equipment required by OSHA and the Pollution Control Board.
DETERMINATION
Virginia Retail Sales and Use Regulation §630-10-63 specifically excludes items which are essential to the operation of a business but not an immediate part of actual production, as tangible personal property used directly in manufacturing or processing even though such items may be directly attached to exempt production machinery.
The regulation further states that ..."the fact that the use of a particular item, ... may be required by any federal, state or local law is not, by itself, dispositive of direct usage in manufacturing or processing."
Therefore, based on the above, the air vacuum system apparently does not meet the requirement of direct usage that would qualify it for the exemption provided by Va. Code §58.1-608(3)(b) for machinery and equipment used in the manufacturing of products for sale and resale.
However, as set forth in §58.1-3660 of the Va. Code, the tax does not apply to pollution control equipment and facilities used primarily for the purpose of abating or preventing pollution of the atmospheres or waters of the Commonwealth and which have been certified to the Department of Taxation by the State Water or State Air Pollution Control Board as used primarily for abating or preventing pollution.
If the taxpayer can provide the department with certification within 30 days of this letter from the proper state authorities that the air cleaners are used primarily for the abatement or prevention of pollution, these items will be removed from the audit. Please forward this information to the department's Technical Services Section at P. O. Box 6-L, Richmond, Virginia, 23282.
If you need any further assistance, please contact the department.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner