Tax Type
Retail Sales and Use Tax
Description
Manufacturing
Topic
Taxability of Persons and Transactions
Date Issued
05-27-1997
May 27, 1997
Re: § 58.1-1821 Application: Retail Sales and Use Tax
Dear******************
This will reply to your letter in which you seek correction of the retail sales and use tax audit of***************(the "Taxpayer") for the period of August 1992 through August 1996.
FACTS
The Taxpayer is in the business of harvesting forest products and milling lumber. The Taxpayer was audited and assessed tax on their saw milling operation. The Taxpayer purchases tracts of timber, harvests the trees, and mills the lumber at the harvesting site. The Taxpayer operates a portable sawmill which is moved from location to location. Once a tract of timber is depleted, the sawmill is disassembled, loaded onto tractor trailers, and moved to the next harvesting site. The Taxpayer is of the opinion that when the sawmill is set up and operable it qualifies as a manufacturing plant and thus enjoys the manufacturing exemption.
DETERMINATION
Code of Virginia § 58.1-609.3.2(iii) provides an exemption from the retail sales and use tax for "machinery or tools or repair parts therefor or replacement thereof, fuel power, energy, or supplies, used directly in... manufacturing... products for sale or resale." Code of Virginia § 58.1-602 defines "manufacturing" as follows:
-
- Manufacturing,... includes the production line of the plant starting with the handling and storage of raw materials at the plant site and continuing through the last step of production where the product is finished or completed for sale and conveyed to a warehouse at the production site...
The department has traditionally interpreted the above statute as limiting the manufacturing exemption provided in Code of Virginia § 58.1-609.3.2 to production activities conducted at a single location. We feel that had the General Assembly not wished to place such a constraint on the exemption, it would not have included references to the plant and production site in Code of Virginia § 58.1-602. Furthermore, the department's interpretation of this statute with respect to the plant site test has been upheld in the lower court decision in Charlottesville Newspaper v. Commonwealth, Circuit Court of the City of Charlottesville (1978), and the Virginia Supreme Court decision in Commonwealth, Dept. Of Taxation v. Wellmore Coal Corp., 228 Va. 149, 320 S.E.2d 509 (1984). In addition, the department's position with respect to the single plant site test is set forth in P.D. 91-99 (6/4/91), copy enclosed, an almost identical situation as the Taxpayer's.
Based on the above, the department finds no basis for revising the assessment. If you should have any questions, please contact******Office of Tax Policy, at ****** .
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/12170K
Rulings of the Tax Commissioner