Taxpayer purchased drills bits and repair parts for its "Bolt-a-Blok" machine. Publicly available information describes the "Bolt-a-Blok" construction technique as follows: Bolt-A-Blok is a revolutionary, unitized post-tensioned, mechanically fastened block system. Quality concrete blocks are connected mechanically by anti-corrosive steel fasteners and bars. The fasteners and bars provide post tensioning which increases the overall capacity and acts as steel reinforcement to the wall. http://www.boltablok.com/about.htm Taxpayer's device fabricates the "anti-corrosive steel fasteners and bars." The photographs supplied by Taxpayer present what appears to be a framework or "jig" upon which the fasteners and bars are constructed. A blank metal bar is placed on the device. A "programmable logic controller" operates a series of electric tools which drill and countersink multiple holes in the metal bar at each of a series of seven stations.
Taxpayer purchases drill bits and parts for this device and it is these drill bits and parts which Taxpayer believes are exempt. In this case, Taxpayer has presented sufficient evidence to establish that the "Bolt-a-Blok" machine is directly used in the direct production of Taxpayer's structural steel building components. Therefore, the drill bits and repair parts are exempt. See 45 IAC 2.2-5-8(h)(2) ("Replacement parts, used to replace worn, broken, inoperative, or missing parts or accessories on exempt machinery and equipment are exempt from tax.")
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The second issue is whether Taxpayer was required to collect sales tax when it sold the structural steel components to sister corporation. The rule is simple; if a "retail merchant" sells tangible personal property to a customer which presents an exemption certificate, the "retail merchant" is not required to collect sales tax. ...
Taxpayer represents that it sold the building components to its sister corporation in retail transactions, that it was acting as a retail merchant when it did so, and that sister corporation provided a valid exemption certificate each time a transaction occurred. As such, the Department is prepared to accept Taxpayer's assertion that it was not required to collect sales tax when it sold building components to sister corporation.
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However, it should be noted with absolute clarity that the conclusions reached in this Letter of Findings are necessarily contingent upon Taxpayer's consistent and accurate representation as to its business relationship with sister corporation.
