Tax Type
Retail Sales and Use Tax
Description
Determination of Exemption
Topic
Exemptions
Date Issued
09-24-1999
September 24, 1999
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This will reply to your request for a ruling on the application of sales and use tax to the purchase of boiler chemicals for use by ***** (the "Taxpayer') in its poultry processing operation.
FACTS
The Taxpayer uses a plant boiler in its manufacturing process to cook poultry products. The Taxpayer purchases chemicals such as anco-ox, ancotreat, ionic resins, ancosteam, and ionac resins. These chemicals are used in the boiler during cooking to sanitize the water and remove minerals from the water. The chemicals come into direct contact with the poultry as it is cooked. Without the use of the chemicals in the cooking process, the impurities in the water can contaminate the poultry products. The Taxpayer wishes to know if the chemicals qualify for the industrial processing exemption.
RULING
Code of Virginia Sec. 58.1-609.3(2) provides an exemption from the sales and use tax for tangible personal property used directly in manufacturing products for sale or resale. The term "used directly' is defined in Code of Virginia Sec. 58.1-602 as "those activities which are an integral part of the production of a product ... but not including ancillary activities such as general maintenance or administration.'
Title 23 of the Virginia Administrative Code 10-210-920(B)(2) states that tangible personal property that is an immediate part of the production process is exempt from the tax when the property is indispensable to the actual production of products for sale. Based on the information provided, the chemicals are an immediate part of the Taxpayer's processing operation as they are used during the cooking of poultry products and come into direct contact with the poultry during cooking. The chemicals are indispensable to the production process because they protect the integrity of the poultry products by preventing contamination during cooking. Without the use of the chemicals, the poultry products would not be in a condition suitable for sale. Therefore, the chemicals qualify for the industrial processing exemption.
This position is consistent with the department's policy as explained in the enclosed copy of Public Document 93-238 (12/21/93). Chemicals used in processing that protect the integrity of the product are considered an integral part of the manufacturing process. However, as this document explains, chemicals used in general maintenance activities are subject to the sales and use tax. The Taxpayer should issue vendor s a properly completed Form ST-11 when purchasing exempt chemicals.
If the Taxpayer has any questions, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
Re: Request for Ruling: Retail Sales and Use Tax
Dear ****
This will reply to your request for a ruling on the application of sales and use tax to the purchase of boiler chemicals for use by ***** (the "Taxpayer') in its poultry processing operation.
FACTS
The Taxpayer uses a plant boiler in its manufacturing process to cook poultry products. The Taxpayer purchases chemicals such as anco-ox, ancotreat, ionic resins, ancosteam, and ionac resins. These chemicals are used in the boiler during cooking to sanitize the water and remove minerals from the water. The chemicals come into direct contact with the poultry as it is cooked. Without the use of the chemicals in the cooking process, the impurities in the water can contaminate the poultry products. The Taxpayer wishes to know if the chemicals qualify for the industrial processing exemption.
RULING
Code of Virginia Sec. 58.1-609.3(2) provides an exemption from the sales and use tax for tangible personal property used directly in manufacturing products for sale or resale. The term "used directly' is defined in Code of Virginia Sec. 58.1-602 as "those activities which are an integral part of the production of a product ... but not including ancillary activities such as general maintenance or administration.'
Title 23 of the Virginia Administrative Code 10-210-920(B)(2) states that tangible personal property that is an immediate part of the production process is exempt from the tax when the property is indispensable to the actual production of products for sale. Based on the information provided, the chemicals are an immediate part of the Taxpayer's processing operation as they are used during the cooking of poultry products and come into direct contact with the poultry during cooking. The chemicals are indispensable to the production process because they protect the integrity of the poultry products by preventing contamination during cooking. Without the use of the chemicals, the poultry products would not be in a condition suitable for sale. Therefore, the chemicals qualify for the industrial processing exemption.
This position is consistent with the department's policy as explained in the enclosed copy of Public Document 93-238 (12/21/93). Chemicals used in processing that protect the integrity of the product are considered an integral part of the manufacturing process. However, as this document explains, chemicals used in general maintenance activities are subject to the sales and use tax. The Taxpayer should issue vendor s a properly completed Form ST-11 when purchasing exempt chemicals.
If the Taxpayer has any questions, please contact ***** at *****.
Sincerely,
Danny M. Payne
Tax Commissioner
Rulings of the Tax Commissioner