Tax Type
Retail Sales and Use Tax
Description
Manufacturing Sanitizing Chemicals
Topic
Taxability of Persons and Transactions
Date Issued
05-11-1992
May 11, 1992
Re: Retail Sales & Use Tax
Dear****************:
This will reply to your letter of October 7, 1991, in which you request a ruling on behalf of your client, * * * (the "Taxpayer') on the applicability of sales and use tax on sanitation chemicals used in a food production facility.
FACTS
The Taxpayer operates a food production facility that produces frozen dinners and specialty foods. Federal law requires the Taxpayer to clean and sanitize all equipment used in the production of the food with various chemicals. The sanitization chemicals are used in the required daily breakdown and cleaning of the direct production and processing equipment. The Taxpayer requests a ruling on the applicability of the retail sales and use tax on the purchase of the sanitization chemicals.
RULING
Va. Code § 58.1-608(A)(3)(b) provides an exemption in pertinent part for "machinery, tools . . . supplies, used directly in processing, manufacturing, refining, mining or conversion of products for sale or resale.' The term "used directly' is defined in Va. Code § 58.1-602 as "those activities which are an integral part of the production of a product, including all steps of an integrated manufacturing or mining process, but not including ancillary activities such as general maintenance or administration.' Virginia Regulation (VR) 630-10-63(C)(2) further states that "[Equipment used for production line testing or quality control is classified as exempt production equipment.'
In the present case, the Taxpayer uses the chemicals to clean and sanitize the production equipment used in the production process. The fact that federal law requires sanitization of equipment has no bearing on the application of the exemption. However, because inadequate sanitization would result in contaminated products, the sanitizing chemicals are an indispensable part of the quality control function of the process.
Additionally, while supplies used in general maintenance, regardless of the frequency, are subject to the tax, the daily cleaning and sanitizing operation done in the present case is so specialized and closely related to the processing function that production cannot take place unless the cleaning and sanitizing of the equipment is performed. Thus, the supplies used in the specialized cleaning and sanitizing of the production equipment may be purchased exempt. Other cleaning supplies and chemicals will be taxable however.
Sincerely,
W. H. Forst
Tax Commissioner
Rulings of the Tax Commissioner