Sales and Use Taxes: The Machinery and Equipment Exemption (Portfolio 1330)

Description

Bloomberg Tax Portfolio, Sales and Use Taxes: The Machinery and Equipment Exemption, No. 1330, discusses sales and use tax incentives for machinery and equipment used in manufacturing operations. In general, most states offer some form of sales and use tax exemption for machinery and equipment that is used directly in manufacturing tangible personal property that is ultimately sold at retail. General rules aside, however, there are significant differences among the states in what operations qualify as “manufacturing,” “machinery and equipment” or whether machinery and equipment are “used directly” in a taxpayer’s operations.

This Portfolio examines the general features of machinery and equipment exemptions and explores their contours in various states. In so doing, the Portfolio considers the following questions: (1) What kinds of operations qualify as “manufacturing”; (2) How do the various states define the phrase “machinery and equipment”; and (3) When is machinery and equipment “used directly” in manufacturing? It also considers special sales and use tax considerations for manufacturers.

For additional relevant Bloomberg Tax Portfolios consult the Multistate Tax Portfolio Classification Guide, in the Bloomberg Tax Portfolio Index binder.

Subscribers to the Internet version of the Portfolio will find late-breaking developments reported in the Bloomberg Tax Daily Tax Report – State.

This Portfolio may be cited as Marcus, Goodman and Wethekam, 1330 T.M., Sales and Use Taxes: The Machinery and Equipment Exemption. Within the Multistate Tax Portfolio Series, however, references to the Portfolios will include only the Portfolio numbers and titles.

Table of Contents

1330.01. INTRODUCTION
1330.02. WHO IS A MANUFACTURER?
1330.03. WHAT IS MANUFACTURING?
1330.04. NEW AND EXPANDED PLANTS
1330.05. SERVICES TO MANUFACTURING MACHINERY AND EQUIPMENT
1330.06. WHAT PROPERTY QUALIFIES AS MACHINERY AND EQUIPMENT?
1330.07. INGREDIENTS, COMPONENTS, CONSUMABLES, ENERGY
1330.08. EQUIPMENT IN SELECT INDUSTRIES
1330.09. PRIMARY OR EXCLUSIVE USE
1330.10. WHEN IS AN ITEM “USED DIRECTLY” IN MANUFACTURING?
1330.11. CONVERSION OF PROPERTY TO A DIFFERENT USE
1330.12. DOCUMENTING THE EXEMPTION