Taxpayer protests the
assessment of use tax on a die oven. Taxpayer's business consists of producing
aluminum extrusions. The extrusions are produced by heating aluminum billets to
several hundred degrees Fahrenheit. The billets are then forced through dies in
presses to produce the desired shape or form.
In order to produce the
aluminum extrusions, the dies themselves must be heated to several hundred
degrees Fahrenheit. In order to heat the dies to the desired temperature,
Taxpayer places the dies into a die oven. The die oven is located near the
manufacturing presses; however, it is separate from the machinery. Cranes lift
the dies and place the dies onto Taxpayer's presses, at which point Taxpayer
and the Department acknowledge that manufacturing occurs. The issue is whether
the die oven is considered to be directly used in manufacturing.
...
Property has an immediate
effect "if it is an essential and integral part of an integrated process
which produces tangible personal property." However, 45 IAC 2.2-5-8(g) provides also that:
The fact that particular
property may be considered essential to the conduct of the business of
manufacturing because its use is required by law or by practical necessity does
not itself mean that the property "has an immediate effect upon the
article being produced."
In this particular case,
the Department acknowledges that the die oven is a necessary and crucial part
of Taxpayer's manufacturing process. Without heated dies, Taxpayer's
manufacturing processes could not continue.
However, the die oven does
not have an immediate effect on the aluminum billets, which are the items used
to produce the aluminum extrusions. Even though the die oven is critical to
Taxpayer's process, its use–to heat dies prior to the dies' placement on
Taxpayer's presses–is one step removed from the actual manufacturing process.
Thus, the die oven is not directly used in direct production with the meaning
of IC § 6-2.5-5-3 and 45 IAC 2.2-5-8.
