Tax Type
Retail Sales and Use Tax
Description
Aluminum can recycling
Topic
Taxability of Persons and Transactions
Date Issued
02-26-1987
February 26, 1987
Re: Request for Ruling/Sales and Use Tax
Dear******************
This will reply to your letter of October 6, 1986, in which you request a ruling on the application of the sales and use tax to the aluminum can recycling activities of your company.
As noted in your letter, the department has ruled on a previous occasion that the processing of scrap metal is an industrial activity entitled to the exemptions set forth in §58.1-608.1 of the Code of Virginia, provided that the processed materials are for sale or resale. As it has already been determined that scrap metal processing is an industrial activity and assuming that the scrap aluminum in question will be resold directly or further processed by your company into new products for sale or resale, I will address here how the industrial exemption will apply to your company's recycling operations.
The applicability of the exemption to your company's operations will depend on whether "processing" is performed at a recycling site. For instance, the scrap aluminum in this case must be flattened, shredded, melted down, or undergo some similar process in order for exempt industrial processing to occur.
In applying these concepts to your company's operations, I reach the following conclusions:
Reverse Vending Machines
These are unmanned facilities which accept cans from the public and dispense cash in return. As these machines sort the ferrous from the non-ferrous materials, weigh the acceptable aluminum scrap, and flatten the cans, I find industrial processing to occur and the machines to be exempt from the tax.
Convenience Centers
These are manned locations where cans are accepted, sorted, weighed, and loaded onto trailers. As there is apparently no processing carried on at these locations, such as the flattening or shredding of cans, the tangible personal property used at the centers is subject to the tax.
Service Centers
These are permanent locations from which cans are accepted from the public and cans collected by reverse vending machines and convenience centers are processed or further processed. The processing activity carried out at the centers is the flattening of cans prior to shipment to another plant. The industrial exemption applies in this case to machinery and tools used in the receipt and handling of scrap metal at the service center site (including scales used to weigh scrap), equipment used to flatten cans, the containers used to package flattened cans for shipment, and machinery and tools used at the plant site to ready the flattened cans for shipment.
Plants
These locations also accept scrap aluminum from the public, but primarily serve as a core location for the further processing of scrap received from service centers. Here cans are separated and segregated into various types or alloys, which are then flattened or shredded to meet the needs of individual customers. As the activities of your company's plants are similar in nature to those of its service centers, the same exemptions will apply.
I trust that this will fully answer the question posed in your letter; however, please feel free to contact us if you have any further questions.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner