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Taxpayer protests the assessment of use tax on gas cylinders that it argues were used in manufacturing and therefore exempt from sales/use tax; however, the auditor determined that the cylinders were not directly used in direct manufacturing and assessed use tax on the rental of the cylinders. ...
According to Taxpayer, the welding gas cylinders are necessary to contain the welding gases. Taxpayer believes that without the containment of the gases in the cylinders, Taxpayer's welding process could not occur. However, despite the fact that the cylinders are necessary and essential, the cylinders are not directly used in the direct production of tangible personal property, as required to qualify for sales and use tax exemption.
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In the Taxpayer's production process, the cylinders are connected via a series of hoses to the actual welding unit(s). The cylinders are not part of the actual welding equipment but rather contain the gases used by the welding equipment. Therefore, Taxpayer has not met its burden to prove the proposed assessment of use tax on the cylinders is wrong, as provided by IC § 6-8.1-5-1(c). Thus Taxpayer's protest regarding the gas cylinders is denied.
Taxpayer also protests the imposition of tax on rental fees paid on a digger used in constructing the manufacturing site.
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Equipment and machinery used to construct or prepare a manufacturing site are not used in the actual production process. The digger Taxpayer rented was used to prepare the site for the eventual placement of equipment and machinery that in turn would be directly used in the actual production process. The rental of the digger is not exempt.
Therefore Taxpayer has not met its burden to prove the proposed assessment wrong, as provided by IC § 6-8.1-5-1(c). Thus Taxpayer's protest regarding the equipment rental is denied.
