Taxpayer asserts that its "conveyor systems" that feed the recycled aluminum into the "chip dryers" is manufacturing equipment. The "conveyor systems" move the recycled aluminum from storage into the "chip dryers." Taxpayer maintains that since the "conveyor systems" continuously feeds an ingredient of the final product into the "chip dryers," the "conveyor systems" are part of the manufacturing process. Taxpayer reasons that since these items of machinery are part of the manufacturing process, then they are used in direct production and are exempt.
While the "conveyor systems" may be a necessary part of Taxpayer's manufacturing process, the devices are not machinery that has an immediate effect on the manufactured product. The "conveyor systems" simply function to transport a raw material during pre-production. Therefore, the transporting of the recycled aluminum by the "conveyor systems" is a pre-production activity and does not fall under the exemption.
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The Department [also] found that use tax was due on the Taxpayer's purchases of a pyrometer, a spectrometer, and a "maintenance agreement" for the spectrometer. Taxpayer asserts that the pyrometer and the spectrometer are exempt manufacturing equipment. Taxpayer maintains that these purchases are testing and inspection machinery and equipment which are essential and integral to Taxpayer's integrated production process… While Taxpayer did not provide any documentation supporting its assertion regarding the use of its purchases, the Department in the course of its research happened to find that a pyrometer is the instrument used to measure the temperature of molten aluminum. Therefore, the pyrometer would be equipment directly used during the production process and qualifies for the manufacturing equipment exemption… [But] Taxpayer has not provided any information/documentation beyond its assertion that the spectrometer is used somewhere in its production process. Without specific information about where and how the equipment is used during the production process, a determination about the exempt status of the equipment cannot be made. Therefore, Taxpayer has not provided sufficient information to demonstrate that the spectrometer is directly used in Taxpayer's production of its goods or that it has "an immediate effect on the article being produced."
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The Department found that use tax was due on Taxpayer's purchase of "slag boxes." Taxpayer maintains that the "slag boxes" are used to accumulate and store molten waste and allow it to cool and, therefore, qualify for the manufacturing equipment exemption.
While equipment that is used to actually extract the waste from the production process can qualify for the manufacturing exemption, any equipment that is used to collect, transport, store, or otherwise process the waste after its extraction is subject to tax. See Graham Creek Farms v. Indiana Dep't of State Revenue, 819 N.E.2d 151 (Ind. Tax Ct. 2004) (exempting equipment that actually remove waste from the production process, but not extending the exemption to equipment that is used to transport the waste that has been removed from production.) Since the "slag boxes" are used to collect, store, and transport waste of the manufacturing process that has been extracted from the production process, the "slag boxes" are used in a post-production activity and are taxable.
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The Department found that use tax was due on Taxpayer's purchase of "cribbing." … During the protest, Taxpayer presented documentation, including pictures, demonstrating Taxpayer's use of the "cribbing." "Cribbing" consists of metal straps that hold the stacks of aluminum ingots on the pallets. The "cribbing" in question in this protest is analogous to the steel straps discussed in 45 IAC 2.2-5-16(c)(1) that acts to enclose or contain a product. Therefore, the "cribbing" at issue qualifies for the nonreturnable container exemption.
