…
When cleaning activities must be preformed constantly during
production, frequently throughout production, and are performed during
production runs, the cleaning has been found to be essential and integral to
Taxpayer's production process and qualified for the equipment exemption under
IC § 6-2.5-5-3(b). However, when cleaning activities are performed infrequently
and/or are performed between jobs, between production runs, or at the end of
the workday, the activities have been found to represent post-production
maintenance activities as found in 45 IAC 2.2-5-8(d),
(h). While Taxpayer did not provide information about the frequency of the
cleanings or the useful life of the molds, Taxpayer had stated that the
cleaning of the molds happens between shifts, on breaks, and whenever the foam
processing is not running. Therefore, Taxpayer's use of the "mold
maintenance equipment" would not qualify for the exemption and represent
post-production maintenance activities as found in 45 IAC 2.2-5-8(d)
& (h).
…
Without the "mold release chemicals" certain
products could not be removed from the molds in one solid piece. The product
would come out in pieces or with flaws making it an unmarketable product. Thus,
the use of the "mold release chemicals" can be compared to a baker's
use of butter or grease to ensure a cake will come out in one piece. However,
while the production equipment that is used to spray the "mold release
chemicals" and the "mold release chemicals" themselves would be
"directly used or consumed" in the manufacturing of the Taxpayer's
products, any equipment used to store the raw materials (i.e., the "mold
release chemicals") or transport the raw materials prior to their entry
into the manufacturing process are taxable. …
The Department's assessment of use tax was not on the
equipment used to spray the "mold release chemicals" or the
"mold release chemicals" themselves, but was on equipment which
stores and transports the "mold release chemicals" prior to their
entry to the production process. Therefore, the Department's assessment of use
tax on this equipment was proper.
…
The Department found that use tax was due on Taxpayer's
purchase of "glue gun holsters." … Taxpayer states that the
"glue gun holsters" hold the glue gun in place during the production
process allowing the employee to merely pull the trigger to put the glue in the
exact place needed at the correct time. Taxpayer cites to 45 IAC 2.2-5-8(c)
example (2)(E), which states that "[a] work bench used in conjunction with
a work station or which supports production machinery within the production
process" is an example of equipment that would qualify for exemption. The "glue gun holsters" in question
in this protest are analogous to the work bench discussed in 45 IAC 2.2-5-8(c)
example (2)(E). The "glue gun holsters" supports production
equipment. Therefore, the "glue gun holsters" at issue qualify for the
manufacturing exemption. Accordingly, Taxpayer's protest to the imposition of
use tax on the "glue gun holsters" is sustained.
…
The Department found that use tax was due on Taxpayer's
purchase of "air monitoring equipment." Taxpayer asserts that the
"air monitoring equipment" is production equipment that qualifies for
exemption under 45 IAC 2.2-5-8(c),
which allows for sales and use tax exemptions for safety clothing or equipment.
Taxpayer states that the equipment evaluates the plant air for any signs of a
chemical spill or leak. ... The
"air monitoring equipment" is not directly involved in the production
process. Even though its existence provides the assurance of a safer operating
environment, nonetheless, the "air monitoring equipment" is not
identical to the shields in U.S. Steel discussed above. The "air
monitoring equipment" is not directly used by workers in the direct
manufacturing process.
…
The Department found that use tax was due on Taxpayer's
purchase of a "seat pad cart carrier." Taxpayer asserts that the
"seat pad cart carrier" is exempt because it is transporting work in
process. Taxpayer maintains that "the movement of the seat frames by
carriers from [Taxpayer] to [Taxpayer's sister company] is part of a
'continuous integrated production process' and should be exempt as determined in
General Motors Corp. v. Indiana Dep't of State Revenue, 578 N.E.2d 399, 404
(Ind. Tax Ct. 1991)." .... However, General
Motors Corp. is not relevant to Taxpayer's situation because unlike the plants
in General Motors Corp. that were owned by the same entity, Taxpayer's plant
and the assembly plant are owned by two different entities. See Mynsberge v.
Indiana Dep't of State Revenue, 716 N.E.2d 629, 631 (Ind. Tax Ct. 1999)
(determining that the manufacturing exemption for the utilities services and
commodities only applies when the purchaser of the utility services and
commodities is also the consumer of those services and commodities)… Therefore, equipment that is used to
transport Taxpayer's product after the completion of its production process to
another taxpayer is post-production transportation equipment, which does not
qualify for exemption under IC § 6-2.5-5-3. See 45 IAC 2.2-5-8(d).
…
The Department imposed use tax on several transactions on
which Taxpayer did not pay sales tax at the time of the retail transactions.
Taxpayer asserts that the Department has assessed use tax on a number of sales
transactions which represented "labor" and "installation"
charges. Taxpayer asserts that these charges are not subject to sales and use
tax under 45 IAC 2.2-4-2.
…
The line items in Taxpayer's invoices that referenced
fabrication and assembly would be included in gross retail income because the
items are charges for completion of the tangible personal property that take
place prior to transfer of the property as provided in IC § 6-2.5-4-1(e)(2). As
provided in the statute, the fact that these charges are stated separately does
not change the fact that they represent an amount that is included as part of
the retail transaction. Additionally, the line items from the invoices which
include a single charge "for installation and fabrication" of an item
of property would be subject to use tax as a unitary transaction as provided in
IC § 6-2.5-1-2. Lastly, as to the transaction for the "scrap
conveyor" where the invoice(s) had the following line items for
"installation of a scrap conveyor," "supervision of
installation," and "materials/consumable cost for installation,"
it is not clear what these charges represent. The invoice did not have a
separate line item for the purchase of the "scrap conveyor." In
addition, Taxpayer has not presented evidence which would indicate that the
"scrap conveyor" was purchased in another transaction. Without
evidence of the separate purchase of the "scrap conveyor," the
transaction in question represents charges for both the fabrication and
assembly of the "scrap conveyor" and the labor for installation
services. Thus, the "scrap conveyor" transaction represents a
transaction that is taxable under IC § 6-2.5-4-1(e)(2) and IC § 6-2.5-1-2.
Accordingly, Taxpayer has failed to meet its burden of proof to demonstrate
that the assessments of use tax were incorrect as found in IC § 6-8.1-5-1.
