Tax Type
Retail Sales and Use Tax
Description
Manufacturing, processing, assembling, or refining; Fertilizer mixer and spreader
Topic
Taxability of Persons and Transactions
Date Issued
03-14-1994
March 14, 1994
Re: §58.1-1821 Refund Application: Retail Sales and Use Tax
Dear*******
This will reply to your letter of May 21, 1993 in which you seek a partial refund of tax, penalty and interest assessed to ******************** (the Taxpayer), as the result of an audit for the period April, 1988 through March, 1991.
FACTS
The Taxpayer manufactures fertilizer products at a central plant site for sale. As part of its operation, the Taxpayer mixes and spreads fertilizer for its customers using floater machines. In previous audits the floater machinery had been taxed at 60% of the purchase price based on the application of the manufacturing exemption to the mixing components (40%).
The Taxpayer asserts that due to the 1984 law change, the preponderance of use rule provides that a singular piece of property becomes taxable or exempt based upon whether 50% or more of its use is in a taxable or exempt manner. The Taxpayer contends that its floater machinery is used exclusively to mix and spread fertilizer and thus the entire cost is exempt from the tax under Va. Code §58.1-609.3(2). As such, the Taxpayer request a refund of the tax, penalty and interest attributable to the taxed portion of the purchase price of the floater machinery.
DETERMINATION
According to a previous ruling to the Taxpayer dated March 14, 1985, copy enclosed, the department determined that the exempt "floater" consists of the mixing tank and sprayer arms which are used directly in industrial processing. This determination is analogous to the department's policy regarding concrete mixer trucks in which the concrete mixing unit mounted on a truck is classified as machinery used directly in manufacturing. (See Virginia Regulation (VR) 630-10-24.2, copy enclosed.) The exemption applies only to the rotating mixer and the accessory parts necessary for connection to the motor. Likewise, the exemption in this case is extended to the mixing and spraying equipment only and not the tractor equipment upon which the mixing components are mounted. As previously determined in past audits, the mixing components of the floater machinery account for 40% of the total purchase price.
The Taxpayer is instructed that for purposes of the preponderance of use rule, "floaters" (defined as the mixing components) are fully exempt based on their primary usage in the manufacturing process and therefore, the auditor was correct in applying the exemption to 40% of the purchase price of the floater machinery.
Based on the foregoing, I find no basis for refund of tax, penalty and interest paid as a result of the audit and associated with the purchase of to the floater machinery.
Sincerely,
Danny M. Payne
Acting Tax Commissioner
OTP/6357J
Rulings of the Tax Commissioner