Document Number
95-67
Tax Type
Retail Sales and Use Tax
Description
Manufacturing, processing, assembling, or refining; Mulch
Topic
Taxability of Persons and Transactions
Date Issued
03-30-1995
March 30, 1995



Re: Request for Ruling: Retail Sales and Use Tax


Dear***************

This will reply to your letter of February 8, 1995 in which you request a ruling on the application of the retail sales and use tax to certain equipment purchased by************* (the "Taxpayer" ) .
FACTS

The Taxpayer is in the business of processing, at a fixed site, wood products commonly cleared from building sites (unusable limbs, brush and stumps) into mulch used as landscaping ground cover. You ask if the equipment used in this process qualifies for the industrial manufacturing exemption under Code of Virginia § 58.1609.3(2).
RULING

Code of Virginia § 58.1-609.3(2) provides an exemption from the sales and use tax for machinery or tools or repair parts therefor, fuel, power, energy and supplies "used directly" in processing or manufacturing products for sale or resale.

Virginia Regulation (VR) 630-10-63 explains that this exemption is available to industrial manufacturers including, but not limited to, businesses classified or substantially similar to other businesses classified in codes 20 through 39 of the Standard Industrial Classification Manual. Based on the information provided and a review of the manual, I find that the Taxpayer falls within Major Group 24 and qualifies for the industrial manufacturing exemption explained above for machinery, repair parts, etc. used directly in processing limbs, brush and stumps into mulch.

Based on the information provided, the wood grinder, the excavator and the stump shear are used directly in the process and qualify for the exemption. The loader also appears to be used directly in the process and qualifies for the exemption. However, if the loader (or any of the equipment noted above) is used in both exempt production activities and nonexempt functions (activities away from the plant site or which are not an integral part of the production of the product), the preponderance of use test set forth in VR 630-10-63.D (copy enclosed) will apply.

I would note, however, that the carriage mount for the grinder, if purchased separately, does not qualify for the exemption, as it is an equipment support and is not used directly in the process. This is analogous to the department's treatment of concrete mixer trucks in VR 630-10-24.2 (copy enclosed). Under that regulation, the mixing unit which actually produces the concrete is exempt, while parts for the truck itself are taxable.

Enclosed is Form ST-11, which the Taxpayer may present to its supplier to make tax-exempt purchases of machinery used directly in the processing of limbs, brush and stumps into mulch.

If you have any questions regarding this ruling, you may contact***********.

                        • Sincerely,



                          Danny M. Payne
                          Tax Commissioner



OTP/9353F

Rulings of the Tax Commissioner

Last Updated 08/25/2014 16:46