Sales tax: missed manufacturing exemptions

Experience shows that many manufacturers fail to capitalize on the sales tax exemptions available to them and, consequently, that they overpay their taxes. In their efforts to promote economic development, many states offer a variety of sales tax exemptions to companies engaged in manufacturing. The...

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Bibliographic Details
Published in:The Tax executive 1994-11, Vol.46 (6), p.476
Main Authors: Nelson, Bruce, Mister, William G
Format: Article
Language:English
Subjects:
Alliances
Chemicals
Graphite
Jurisdiction
Laws, regulations and rules
Manufacturers
Manufacturing
Manufacturing industry
Meat processing
Milk
Personal property
Raw materials
Sales tax
Sales taxes
State court decisions
State laws
State taxation
Tax exemptions
Taxation
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Summary:Experience shows that many manufacturers fail to capitalize on the sales tax exemptions available to them and, consequently, that they overpay their taxes. In their efforts to promote economic development, many states offer a variety of sales tax exemptions to companies engaged in manufacturing. The exemptions can be classified under 4 general headings: 1. resale-wholesale exemptions, 2. packaging-container exemptions, 3. energy exemptions, and 4. machinery exemptions. The major obstacle to compliance is the mind-numbing definitional variations from state to state. The first definitional hurdle to overcome is to determine just who is a manufacturer. In the many controversies over the definition of manufacturing, the key terms are processing, refining, assembly, construction, and fabrication. Given the overlapping character of the exemptions, the varied statutory wording, and the sometimes conflicting case law of more than 40 states that offer one or more of these 4 sales tax exemptions, it is not surprising that these exemptions are frequently missed or misunderstood.
ISSN:0040-0025