Tax Type
Retail Sales and Use Tax
Description
Printing supplies
Topic
Taxability of Persons and Transactions
Date Issued
05-28-1985
May 28, 1985
RE: § 58.1-1821 Application/Sales & Use Tax
Dear ****
This will reply to your letter of February 27, 1985, on behalf of ***** ('Taxpayer"), seeking abatement of a portion of an assessment in the above referenced case.
Facts
Taxpayer is in the business of industrial printing. As a result of an audit for the period January l, 1982, through October 31, 1984, an assessment was issued for untaxed sales, and unreported use tax on certain purchases made by taxpayer. Taxpayer only contests that portion of the audit related to the use tax. Specifically, taxpayer claims that a forklift used to unload paper to storage and to and from its production line is "used directly" in its manufacturing process. Furthermore, taxpayer contends that its use of certain cleaners, rejuvenators, and wipers during single press runs, and between press runs, are similarly "used directly" in its manufacturing process. Unlike general maintenance items, such cleaning products are, according to taxpayer, an essential part of the printing process, in preventing the accumulation of excess ink, and thereby, insuring the quality of its printed products.
It is our understanding that the wipers referred to above are used both in the actual printing process and for general maintenance.
Determination
§ 58.1-608(1)(C) of the Virginia Code exempts from the sales and use tax, "machinery or tools or repair parts therefor or replacements thereof..., used directly in processing, manufacturing, refining, mining, or conversion of products for sale or resale."
Prior to July 1, 1984, if a single item of tangible personal property was used both directly and indirectly in industrial activities, the department would prorate the sales and use tax between such direct and indirect uses.
However, as of July 1, 1984, such property "will be totally exempt from [sales and use] tax if the preponderance of its use is in exempt production activities." (See § 630-10-63(D), Virginia Sales and Use Tax Regulations.)
In the present case, taxpayer contends that its forklift is used directly in industrial production, but provides no supportive documen-tation to verify the actual uses of such forklift.
Upon receipt by the Technical Services Section, Office Services Division, of the Department of such supportive documentation, within 30 days of the date of this letter, which details the direct versus indirect industrial uses of the forklift, we will consider adjusting the audit in accordance with the above referenced policies. (e.g. we will prorate any exempt versus non-exempt use of the forklift prior to July 1, 1984, and either hold exempt or non-exempt the entire use of such forklift, based on the preponderance of its use, from July 1, 1984, through the end of the audit period.)
For example, the forklift will be considered to be used directly in production when it is "used on the plant site, to unload raw materials or to convey raw materials to storage or from storage to the production line, to convey products from one step of production to another, or to convey finished products to packaging or warehouse areas." § 630-10-63(C)(2), Virginia Sales and Use Tax Regulations, 1985.
Conversely, the forklift will not be considered to be used directly when it is not used on the plant site, or when it is "used to transport raw materials to a plant site." Ibid.
§ 630-10-63(C) of the Regulations states in part that "Equipment used for production line testing or quality control is classified as exempt production equipment; [and] operating supplies which are actively and continually consumed in the operation of exempt machinery and equipment, are deemed used directly in manufacturing or processing and are not subject to the tax."
Therefore, we find that certain cleaners and rejuvenators are "used directly" in taxpayer's manufacturing process. However, insofar as the wipers are used by taxpayer in both special maintenance activities which are exempt and general maintenance activities which are non-exempt, they remain potentially subject to sales and use taxation.
For example, the wipers will be considered to be "used directly" in the manufacturing process, when they are actively and continually consumed in the operation of taxpayer's printing machinery. Conversely, such wipers will be deemed to be used in general maintenance when they are used in the routine repair, servicing, and maintenance of taxpayer's printing and other machinery.
Therefore, upon receipt by the Technical Services Section, Department of Taxation, P. O. Box 6-L, Richmond, Virginia 23282, within 30 days of this letter, of documentation segregating the manufacturing or special maintenance uses of the wipers from their general maintenance uses, we will adjust the audit according to the policies and principles outlined above with regard to the forklift.
Based on all of the foregoing, we will abate that portion of the assessment related to the cleaners and rejuvenators, and will consider partial abatement of the assessment with regard to the forklift and wipers upon receipt of the requested documentation.
Sincerely
W. H. Forst
Tax Commissioner
RE: § 58.1-1821 Application/Sales & Use Tax
Dear ****
This will reply to your letter of February 27, 1985, on behalf of ***** ('Taxpayer"), seeking abatement of a portion of an assessment in the above referenced case.
Facts
Taxpayer is in the business of industrial printing. As a result of an audit for the period January l, 1982, through October 31, 1984, an assessment was issued for untaxed sales, and unreported use tax on certain purchases made by taxpayer. Taxpayer only contests that portion of the audit related to the use tax. Specifically, taxpayer claims that a forklift used to unload paper to storage and to and from its production line is "used directly" in its manufacturing process. Furthermore, taxpayer contends that its use of certain cleaners, rejuvenators, and wipers during single press runs, and between press runs, are similarly "used directly" in its manufacturing process. Unlike general maintenance items, such cleaning products are, according to taxpayer, an essential part of the printing process, in preventing the accumulation of excess ink, and thereby, insuring the quality of its printed products.
It is our understanding that the wipers referred to above are used both in the actual printing process and for general maintenance.
Determination
§ 58.1-608(1)(C) of the Virginia Code exempts from the sales and use tax, "machinery or tools or repair parts therefor or replacements thereof..., used directly in processing, manufacturing, refining, mining, or conversion of products for sale or resale."
Prior to July 1, 1984, if a single item of tangible personal property was used both directly and indirectly in industrial activities, the department would prorate the sales and use tax between such direct and indirect uses.
However, as of July 1, 1984, such property "will be totally exempt from [sales and use] tax if the preponderance of its use is in exempt production activities." (See § 630-10-63(D), Virginia Sales and Use Tax Regulations.)
In the present case, taxpayer contends that its forklift is used directly in industrial production, but provides no supportive documen-tation to verify the actual uses of such forklift.
Upon receipt by the Technical Services Section, Office Services Division, of the Department of such supportive documentation, within 30 days of the date of this letter, which details the direct versus indirect industrial uses of the forklift, we will consider adjusting the audit in accordance with the above referenced policies. (e.g. we will prorate any exempt versus non-exempt use of the forklift prior to July 1, 1984, and either hold exempt or non-exempt the entire use of such forklift, based on the preponderance of its use, from July 1, 1984, through the end of the audit period.)
For example, the forklift will be considered to be used directly in production when it is "used on the plant site, to unload raw materials or to convey raw materials to storage or from storage to the production line, to convey products from one step of production to another, or to convey finished products to packaging or warehouse areas." § 630-10-63(C)(2), Virginia Sales and Use Tax Regulations, 1985.
Conversely, the forklift will not be considered to be used directly when it is not used on the plant site, or when it is "used to transport raw materials to a plant site." Ibid.
§ 630-10-63(C) of the Regulations states in part that "Equipment used for production line testing or quality control is classified as exempt production equipment; [and] operating supplies which are actively and continually consumed in the operation of exempt machinery and equipment, are deemed used directly in manufacturing or processing and are not subject to the tax."
Therefore, we find that certain cleaners and rejuvenators are "used directly" in taxpayer's manufacturing process. However, insofar as the wipers are used by taxpayer in both special maintenance activities which are exempt and general maintenance activities which are non-exempt, they remain potentially subject to sales and use taxation.
For example, the wipers will be considered to be "used directly" in the manufacturing process, when they are actively and continually consumed in the operation of taxpayer's printing machinery. Conversely, such wipers will be deemed to be used in general maintenance when they are used in the routine repair, servicing, and maintenance of taxpayer's printing and other machinery.
Therefore, upon receipt by the Technical Services Section, Department of Taxation, P. O. Box 6-L, Richmond, Virginia 23282, within 30 days of this letter, of documentation segregating the manufacturing or special maintenance uses of the wipers from their general maintenance uses, we will adjust the audit according to the policies and principles outlined above with regard to the forklift.
Based on all of the foregoing, we will abate that portion of the assessment related to the cleaners and rejuvenators, and will consider partial abatement of the assessment with regard to the forklift and wipers upon receipt of the requested documentation.
Sincerely
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner