Tax Type
Retail Sales and Use Tax
Description
Heating fuel used in your manufacturing plant
Topic
Exemptions
Date Issued
03-19-1982
March 19, 1982
Re: Request for Ruling/Sales and Use Tax
Dear **********************
This will reply to your letters of November 25, 1981 and February 26, 1982 in which you request a ruling on the applicability of the sales and use tax to heating fuel used in your manufacturing plant.
Facts
********** is a manufacturer of corrugated metal products. A part of the manufacturing process takes place in a building which contains a cold roll forming mill. This machine uses water and oil for lubricating and cooling, and this same solution is used for coolant in the cutting saw.
Heating fuel is used to heat the building containing the above referenced equipment. The heat in turn maintains the temperature of the oil and water compound at a point above freezing.
Determination
§ 58-441.6 of the Code of Virginia exempts from the sales and use tax:
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- fuel, power, energy, or supplies, used directly in processing, manufacturing, refining, mining or conversion of products for sale or resale [emphasis added].
- fuel, power, energy, or supplies, used directly in processing, manufacturing, refining, mining or conversion of products for sale or resale [emphasis added].
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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.
- 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.
In interpreting these statutory provisions, the Department has consistently held that fuel and supplies used to maintain a controlled environment for protection of the manufactured product do meet the test of direct use in production and are consequently exempt from the tax.
In the instant case, you are using heating fuel to heat the building which in turn insures that the equipment which manufactures the product operates properly. This fuel is clearly used indirectly in your production facility; however, indirect usage items do not qualify for a sales and use tax exemption. If the fuel were used to operate production equipment it would not be subject to the tax. Similarly, if the fuel were used to maintain a controlled environment for the protection of the product itself it would be exempt. However, your use of the fuel to heat the building is one step removed from direct use in production.
Therefore, no sales and use tax exemption will apply to fuel purchased to heat your production facility, and no refund requests for such fuel will be honored.
Sincerely .
W. H. Forst
State Tax Commissioner
Rulings of the Tax Commissioner