Sales Tax Exemptions for manufacturing equipment

by Head of Research at TTR, Ken Webster

While Indiana’s sales tax laws generally apply to most transactions, certain items have special treatment when it comes to sales taxes. The Indiana sales tax exemptions for manufacturing are available to all Indiana manufacturers on purchases of manufacturing machinery, tools, and equipment that are “directly used” in production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing of tangible personal property per Indiana Admin. 

The Indiana Department of Revenue (DOR) recently ruled that a skid loader did not qualify for the state manufacturing exemption. The taxpayer was an Indiana company that sold fertilizer and provided spreading services for farmers. The taxpayer purchased a skid loader exempt from tax under the manufacturing exemption. The taxpayer argued that the exemption applied because the equipment was used to move materials into the fertilizer blending process. The DOR did not agree that the taxpayer was in the business of fertilizer production, but addressed the claim anyway.

Indiana exempts equipment for direct use in production. The exemption applies to equipment that has an immediate impact on the article being produced. The ruling determined that skid loader was taxable because loading materials is a “pre-production activity” that does not have an immediate impact upon the production of fertilizer. The ruling also briefly discusses a claim for the resale exemption. However, the claim was denied because the equipment in question was used by the taxpayer, and was not resold.

The Georgia Department of Agriculture recently published detailed guidance on changes to the 2019 Georgia Agricultural Tax Exemption (GATE) program. Agricultural producers now qualify under the program if they generate annual income of at least $5,000 or more from aggregate sales of livestock and qualifying crops.

The income requirement was previously $2,500, and it only applied to non-aggregate (single crop) sales of timber, orchard crops, pecans, blueberries, blackberries, olives, and horticulture. However, livestock now qualifies as a long-term agricultural product under the 2019 GATE program.

The publication also provides information on how to apply for an exemption card, card effective dates, card misuse, and requirements for retailers making exempt sales.

Our Sales Tax Research Team keeps you completely up to date on current sales tax exemption laws and sales tax rules across the country.

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Ken Webster is an Executive Leader and Head of Research at TTR, a subscription-based website that provides sales, use, and transaction tax answers and tax rates to thousands of companies worldwide. https://www.ttrus.com

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