Tax Type
Retail Sales and Use Tax
Description
Manufacturing, processing, assembling, or refining; Cardboard
Topic
Taxability of Persons and Transactions
Date Issued
08-10-1994
August 10, 1994
Re: Va. Code §58.1-1821 Application: Sales and Use Tax
Dear***********
This will reply to your letter of June 14, 1994 in which you seek a reconsideration of the Va. Code§58.1-1821 determination issued by the department on May 20, 1994 to ********* (the Taxpayer).
Specifically, the Taxpayer takes exception to the department's determination that removal of plastic components and the baling of cardboard into thousand pound bales does not constitute industrial processing. As provided in the May 20, 1994 determination, "the term "processing" was defined by the Virginia Supreme Court in Commonwealth v. Orange-Madison Cooperative, 220 Va. 655, 261 S.E.2d 532 (1980) as requiring that a product a treatment rendering it more marketable or useful." (Emphasis added).
In the present case, the cardboard is the product. The removal of plastic components and the baling of the cardboard does not render the cardboard itself more marketable. While this is a necessary process required by the paper mill prior to acceptance, the product itself, i.e., cardboard, does not "undergo a treatment" rendering it more marketable. The actual cardboard is in the same form or state after the removal of plastic components and baling as it was as a whole box. Therefore, based on the definition of processing set forth in Commonwealth v. Orange-Madison Cooperative, the department holds to it's original determination, thus denying the industrial processing exemption.
The audit will be revised in accordance with the May 20, 1994 determination and a revised assessment will be issued.
If you should have any further questions, please feel free to contact the department.
Sincerely,
Danny M. Payne
Tax Commissioner
OTP/8167K
Rulings of the Tax Commissioner