S manufacturing.
For purposes of this rule, all purchases
of tangible personal property are taxable, except those in which the purpose of
the consumer is to incorporate the thing transferred as a material or a part
into tangible personal property to be produced for sale by manufacturing,
assembling, processing, or refining or to use the thing transferred, as
described in section
of the Revised Code and this rule, primarily in a manufacturing operation to
produce tangible personal property for sale.
This means that a person who buys tangible personal property
and will make it a part or constituent of something that he is manufacturing
for sale, or buys something that is used in a manufacturing operation, does not
have to pay sales or use tax on the thing purchased.
Tangible personal property purchased by a manufacturer as a
component or constituent of a product to be manufactured for sale is excepted
from sales and use tax. The purchase of all such tangible personal property is
not taxable, even though a portion will be lost or removed as waste or for
testing. The manufacturer must pay use tax on the price, as defined in division
(G) of section
of the Revised Code, of any completed product not sold and stored or used by
the manufacturer in a taxable manner, except such product that is consumed in
testing or is disposed of because it is defective or otherwise unsalable.
"Manufacturing operation" means a process
in which materials are changed, converted, or transformed into a different
state or form from which they previously existed and includes refining
materials, assembling parts, and preparing raw materials and parts by mixing,
measuring, blending or otherwise committing such materials or parts to the
manufacturing process. "Manufacturing operation" does not include packaging.
Tangible personal property purchased by a manufacturer for use
in packaging is taxable unless exempted pursuant to division (B)(15) of section
of the Revised Code.
Any business whose sole activity is a process that does not
include conversion or alteration of tangible personal property into a different
state or form is not a manufacturer and is not covered by this rule.
The manufacturing operation begins when the raw materials or
parts are committed to the manufacturing process. If the raw materials or parts
are stored after being received at the manufacturing facility, the raw
materials or parts are not committed until after they are removed from such
initial storage. The point of commitment is where the materials handling from
such initial storage has ceased or the point where the materials or parts have
been mixed, measured, blended, heated, cleaned, or otherwise treated or
prepared for the manufacturing process, whichever first occurs. If the raw
materials or parts are not stored, they are committed at the point where
materials handling from the place of receipt ceases or where they are mixed,
measured, blended, heated, cleaned, or otherwise treated or prepared for the
manufacturing process, whichever first occurs. The commitment of the materials
or parts need not be irrevocable, but they must have reached the point, after
materials handling from initial storage has ceased, where they normally will be
utilized within a short period of time. The point of commitment frequently will
be different for particular materials and parts, since they are introduced at
different times in the manufacturing operation.
Things used in any activity, including movement or storage of
the materials or parts before they are committed are taxable.
See examples 1, 2, 3, 4, 6, 9, 40, 61, 63, and 64.
"Refining" means removing or
separating a desirable product from raw or contaminated materials by
distillation or physical, mechanical, or chemical processes.
This definition of "refining" describes a type of manufacturing
process and is not limited to the petroleum industry. A business whose sole
activity is sorting material by size or other physical characteristic, or
washing dirt or other contaminates from the surface of parts or other materials
is not engaged in refining.
See examples 4, 5, and 63.
"Assembly" and "assembling" mean
attaching or fitting together parts to form a product, but do not include
packaging a product.
Assembly generally refers to the process whereby previously
manufactured parts or components are brought together and attached to create a
complete, or more complete, item.
See example 15.
"Manufacturer" means a person who is
engaged in manufacturing, processing, assembling, or refining a product for
"Manufacturing facility"
means a single location where a manufacturing operation is conducted, including
locations consisting of one or more buildings or structures in a contiguous
area owned or controlled by the manufacturer.
The manufacturer does not have to own or lease the property,
but must have the legal right to use it. If the property under the control of
the manufacturer is not contiguous, it is not a single manufacturing facility.
See examples 21, 23, and 57.
"Materials handling" means the movement
of the product being or to be manufactured, during which movement the product
is not undergoing any substantial change or alteration in its state or form.
"Testing" means a process or
procedure to identify the properties or assure the quality of a material or
"Completed product"
means a manufactured item that is in the form and condition as it will be sold
by the manufacturer. An item is completed when all processes that change or
alter its state or form or enhance its value are finished, even though the item
subsequently will be tested to ensure its quality or be packaged for storage or
A product may be completed, as far as a particular manufacturer
is concerned, even though it is not in the form in which it will be sold to the
ultimate consumer because it will be further manufactured by another
manufacturer. If the product will be further manufactured by the same
manufacturer at a different manufacturing facility, the product is still
in-process and is not completed.
See examples 8, 13, and 64.
"Continuous manufacturing operation"
means the process in which raw materials or components are moved through the
steps whereby manufacturing occurs. Materials handling of raw materials or
parts from the point of receipt or pre-production storage or of a completed
product, to or from storage, to or from packaging, or to the place from which
the completed product will be shipped, is not a part of a continuous
manufacturing operation.
The continuous manufacturing operation begins at the point
where the raw materials or parts are committed and ends at the point where the
product is completed.
There may be several continuous manufacturing operations at the
same manufacturing facility, each producing a different product.
The things used in the continuous manufacturing operation
include all production machinery, the materials handling equipment that moves
the product between the production machines, and any equipment, such as tanks,
shelves, or racks, that temporarily store or hold the product in between
production machines. Even though testing equipment used to test in-process
product is not taxable under this rule, no testing procedure is part of the
continuous manufacturing operation unless it is physically and functionally
integrated between steps on the production line.
See examples 1, 6, 8, 11, 19, and 63.
Things transferred for use in
a manufacturing operation include, but are not limited to, any of the
following:
Production machinery and
equipment that act upon the product or machinery and equipment that treat the
materials or parts in preparation for the manufacturing operation.
Production machinery is the equipment that actually changes the
state or form of the product, that is, the tangible personal property being
manufactured for sale. Also included is the equipment that treats the product
by blending, mixing, measuring, washing, agitating, filtering, heating,
cooling, or similar processes after the material or parts have been committed
to the manufacturing operation and before the product is completed.
See examples 1, 4, 7, 8, 18, 24, 27, 32, 35, 56, 60, 61 and 63.
Materials handling
equipment that moves the product through a continuous man
equipment that temporarily stores the product during the manufacturing
or, excluding motor vehicles licensed to operate on public highways,
equipment used in intraplant or interplant transfers of work in process where
the plant or plants between which transfers occur are manufacturing facilities
operated by the same person.
Any equipment, except motor vehicles registered for highway
operation, used to move or transport the in-process product between
manufacturing facilities of the same manufacturer, is considered to be used in
the manufacturing operation.
See examples 1, 8, 9, 10, 11, 57, 59, 60, 63, and 64.
Catalysts, solvents, water,
acids, oil, and similar consumables that interact with the product and that are
an integral part of the manufacturing operation.
This describes those substances that do not appreciably become
a component part of the product, but which usually come in contact with the
product during the manufacturing process.
See examples 1, 13, 14, 28, 35, and 62.
Machinery, equipment, and other tangible
personal property used during the manufacturing operation that control,
physically support, produce power for, lubricate, or are otherwise necessary
for the functioning of production machinery and equipment and the continuation
of the manufacturing operation.
Materials which are used to make foundations, supports, and
other things which are incorporated into a building or structure and become
accessions to the real estate may not be purchased without payment of tax under
this rule. Foundations, structural steel, and similar items which provide
physical support and which retain their status as personal property must be
treated for purposes of taxation separately from the equipment which they
Foundations and supports for production machinery, materials
handling equipment, and other equipment used in a continuous manufacturing
operation are not taxable. Similarly, foundations and supports for tangible
personal property used to manufacture tangible personal property used in the
manufacturing operation, as described in paragraph (C)(5) for
testing equipment, as described in paragraph (C)(6) and for
equipment used to handle or store scrap for recycling at the same facility, as
described in paragraph (C)(7) of this rule, are deemed necessary for the
continuation of the manufacturing operation and are not taxable.
Tangible personal property that monitors in-process product or
that lubricates, cools, monitors, or controls production machinery, materials
handling equipment, and other equipment used in a continuous manufacturing
operation is not taxable. Similarly, tangible personal property that
lubricates, cools, monitors, or controls equipment used to manufacture tangible
personal property used in the manufacturing operation, as described in
paragraph (C)(5) testing equipment, as described in paragraph
(C)(6) and equipment used to handle or store scrap for recycling
at the same facility, as described in paragraph (C)(7) of this rule, is deemed
necessary for the continuation of the manufacturing operation and is not
taxable. However, all equipment that makes or stores records of monitoring is
See examples 1, 15, 16, 17, 18, 25, 29, 52, 55, 57, and 59.
Machinery, equipment,
fuel, power, material, parts, and other tangible personal property used to
manufacture machinery, equipment, or other tangible personal property used in
manufacturing a product for sale.
If a manufacturer makes an item that is used in the
manufacturing operation as described in this rule, such as tools, tooling,
replacement parts for machinery, or consumable substances, such as acid or
solvents, the raw materials and components that go into that item are not
Certain things used by the manufacturer to make the item that
will be used in the manufacturing operation are also not taxable. These things
include the machinery which manufactures the item by changing the state or form
of the raw materials or components, the materials handling equipment which
moves the item between such machinery, and any fuel or power used to operate
the machinery or materials handling equipment.
After the item is in the form in which it will be used in the
manufacturing operation, any equipment that stores it or moves it to or from
the manufacturing operation is taxable.
See example 18.
Machinery, equipment, and other tangible
personal property used by a manufacturer to test raw materials, the product
being manufactured, or the completed product.
The equipment and supplies that the manufacturer uses to
perform testing, and tangible personal property used to physically support,
control, lubricate, cool, or monitor such equipment are not taxable. Those
things that are merely used in the lab or other area where testing occurs, but
play no part in the actual testing procedures, such as furniture, storage
equipment, and computers that record or store the test results, are taxable.
The testing activity is not part of the continuous manufacturing operation
unless it is physically and functionally integrated between steps on the
production line. Materials handling equipment used to transport test samples is
taxable. Equipment and supplies used to test fuel, consumables, equipment, or
anything else that is not a raw material, the product being manufactured, or a
completed product are taxable.
See examples 3, 4, 19, and 60.
Machinery and equipment used to handle or
temporarily store scrap that is intended to be reused in the manufacturing
operation at the same manufacturing facility.
In this context, scrap is any portion or component of the
product being manufactured that is removed, intentionally or unintentionally,
from the manufacturing process or that is residual after the process is
completed. If the manufacturer recycles the scrap back into the manufacturing
operation at the same facility, the equipment which moves or stores the scrap
is not taxable.
Scrap which is to be sold or to be reused as a raw material by
the manufacturer at another facility, is considered to be processed in a
manufacturing operation if the state or form of the scrap is changed or
altered. In such a case, the scrap, as it is removed from the manufacturing
operation, is a raw material and the equipment which transports or stores it
before it is committed to the operation where it undergoes manufacturing is
taxable. After such manufacturing is over, the processed scrap is a completed
See examples 22 to 24, 47, and 61.
Electricity, coke, gas, water, steam, and
similar substances used in the man machinery and equipment
used for, and fuel consumed in, producing or extract and
machinery, equipment, and other tangible personal property used to treat,
filter, pump, alter voltage, or otherwise make the substance suitable for use
in the manufacturing operation.
Anything that is a fuel or a source of power for machinery used
in the manufacturing operation, or that provides energy for the manufacturing
process itself, is not taxable. Similarly, substances which transmit energy,
such as steam or cooling water which transmits heat to or from the process or
machinery, are not taxable. Any equipment that the manufacturer uses to
generate, produce, or extract these substances, as well as fuel used to power
such generation or extraction, is not taxable.
Tangible personal property which treats the fuel or power is
not taxable. Such things may include coal crushers, electrical transformers,
fuel or water filters, and water treatment chemicals.
See examples 22 to 32, 59, and 64.
Machinery, equipment, and other tangible
personal property used to transport or transmit electricity, coke, gas, water,
steam, or similar substances used in the manufacturing operation from the point
of generation, if produced by the manufacturer, or from the point where the
substance enters the manufacturing facility, if purchased by the manufacturer,
to the manufacturing operation.
Such equipment includes wires, conduit, pipes, larry cars, and
conveyors.
See examples 12, 22 to 32.
Machinery, equipment, and other tangible
personal property that treats, filters, cools, refines, or otherwise renders
water, steam, acid, oil, solvents, or similar substances used in the
manufacturing operation reusable, provided that the substances are intended for
reuse and not for disposal, sale, or transportation from the manufacturing
See examples 1, 20, 33, 34, 35, 36, 37, and 64.
Parts, components, and repair
and installation services for items used in the manufacturing operation as
described in paragraph (C) of this rule.
Replacement parts for nontaxable equipment are not taxable. Any
repair service or installation service purchased from an independent contractor
for repairing or installing nontaxable equipment is not taxable.
See examples 38, 44, 55, and 56.
Things transferred for use in a
manufacturing operation do not include:
Tangible personal property used in administrative, personnel, security,
inventory control, record keeping, ordering, billing, or similar functions.
Those things that are used in the "non-manufacturing" aspects
of the manufacturer's business are generally taxable. This includes what is
broadly known as office equipment, furniture, and supplies. Anything, including
computers and software, used for communication, ordering, billing, inventory
control, or record keeping, including testing or production records, is
Things used in providing security include devices to monitor or
observe personnel or detect intruders.
See examples 7, 15, 16, 19, 39, and 55.
Tangible personal property used in
storing raw materials or parts prior to the commencement of the manufacturing
operation or used to handle or store a completed product, including storage
that actively maintains a completed product in a marketable state or form.
Tangible personal property
used to handle or store scrap or waste intended for disposal, sale, or other
disposition, other than reuse in the manufacturing operation at the same
manufacturing facility.
Tangible personal property used to store fuel, water, solvents, acid, oil, or
similar items consumed in the manufacturing operation.
All types of storage, be it of raw materials or parts, product
(except in-process product), completed product, consumables, fuel, waste,
scrap, equipment, tools, supplies, repair parts, etc., is taxable.
Similarly, anything used to handle, move, or transport people
or personal property in the manufacturing facility is taxable, except for
materials handling during a continuous manufacturing operation or during the
manufacture of an item which will be used in the manufacturing operation, as
described in paragraph (C)(5) of this rule, or the transmission of fuel, power,
and similar substances as described in paragraph (C)(9) of this rule.
See examples 1, 2, 3, 4, 6, 9, 11, 20, 37, 40, 41, 42, 43, 44,
47, 59, 60, 61, and 64.
Tangible personal property that is or is
to be incorporated into realty.
Any tangible personal property that will become part of the
real estate is taxable under this rule.
See examples 32, 45, and 46.
Machinery, equipment, and other tangible
personal property used for ventilation, dust, or gas collection, humidity or
temperature regulation, or similar environmental control, except machinery,
equipment, and other tangible personal property that totally regulates the
environment in a special and limited area of the manufacturing facility where
the regulation is essential for production to occur.
All equipment and supplies that monitor, regulate, or improve
the environmental conditions in the manufacturing facility are taxable. This
includes all lighting, heaters, air conditioning equipment, fans, heat exhaust
equipment, air make up equipment, dust control or collection equipment, and gas
detection, collection, and exhaust equipment. This should not be read to change
the traditional classification of real and personal property.
The only exception to the taxing of these items is equipment
which totally regulates the environment in a special and limited area of the
facility, such as a clean room or paint booth, where such total regulation is
essential for production to occur. Even in such a special area, things that do
not provide essential environmental regulation, such as safety or communication
equipment, are taxable.
See examples 7, 47, 48, and 49.
Tangible personal property used for the
protection and safety of workers, unless the property is attached to or
incorporated into machinery and equipment used in a continuous manufacturing
operation.
Protective clothing and devices, such as safety shoes, gloves,
earplugs, hard hats, respirators, first aid supplies, etc. are taxable.
Similarly, equipment installed to protect workers or shield them from harm is
taxable, unless it is made a part of machinery or equipment used in a
continuous manufacturing operation.
Equipment and supplies used to detect, extinguish, prevent,
cure, or mitigate fire, explosion, flood, or other calamity in the
manufacturing facility are taxable.
See examples 9, 43, 50, 51, 52, and 53.
Machinery, equipment, and other tangible
personal property used for research and development.
See examples 18 and 54.
Machinery, equipment, and other tangible
personal property used to clean, repair, or maintain real or personal property
in the manufacturing facility.
Tools, equipment, and supplies made or purchased by the
manufacturer for use in maintaining, installing, repairing, or cleaning its
property, real or personal, are taxable. This includes any such items used on
nontaxable equipment. This does not apply to repair or replacement parts or
supplies which are taxable or not, depending on the taxability of the equipment
into which they are installed.
See examples 32, 55, 56, and 58.
Motor vehicles registered for operation
on the public highways.
See examples 21, 57, and 63.
For purposes of this rule, any tangible
personal property used by a manufacturer in both a taxable and a nontaxable
manner shall be totally taxable or totally exempt from taxation based upon its
quantified primary use. If the tangible personal property consists of
fungibles, they shall be taxed upon the proportion of the fungibles used in a
taxable manner.
See examples 19, 25, 59 and 64.
Persons whose only activity is printing
and whose product produced for sale consists wholly of printed matter are not
manufacturers under this rule. The taxability of things used by printers must
be determined pursuant to division (E)(8) of section
the Revised Code.
If a portion of a manufacturer's manufacturing process involves
printing, the taxability of the tangible personal property primarily devoted to
the printing operation shall be determined pursuant to division (E)(8) of
the Revised Code.
Nothing in this rule restricts or denies any exception or exemption that may be
available to a manufacturer under other provisions of the sales tax statutes or
rules of the tax commissioner. EXAMPLES
A steel manufacturer galvanizes its flatroll steel to provide
its customers with a corrosion resistant product. Through electrolysis and a
recirculating zinc solution, zinc is chemically bonded to the steel.
Recirculation of the zinc solution involves an intricately-woven system of
fibrecast pipes, pumps, dissolution tanks, and electrolytic recirculating
tanks, all of which are controlled by computers. As with many other types of
manufacturing-related equipment, the size, weight, and configuration of these
items require special foundations and supports. The entire system provides the
necessary recipe and volume of solution for precise applications of zinc in a
high velocity rolling mill.
* The zinc solution is a raw material which becomes a component
of the completed product.
* The solution in which the zinc is dissolved is a consumable
that interacts with the product and is not taxable.
* The piping system, dissolution tank, pumps, and electrolytic
holding tanks are all used in a continuous manufacturing operation and are not
* The computers are used to control production machinery and
in-process materials handling. The foundations and structural supports
similarly are used in connection with production machinery. Therefore, these
items are all not taxable.
A manufacturer of concrete owns a ready-mix batch plant. Cement
and aggregate are purchased from and delivered by outside suppliers. Cement is
removed from delivery trailers by a vacuum system, which deposits the cement in
a storage silo. Aggregate of particular sizes is delivered by dump trucks. The
aggregate is stored in piles, segregated by size. As needed, cement is removed
from the silo by screw conveyor and batched into a mixing drum. Aggregate is
moved from the proper pile(s) by a front loader, which deposits the aggregate
on a belt conveyor which lifts the stone up and into the mixing drum. Water is
added into the drum and mixing commences. After a short time, concrete is
discharged into mixer trucks. The mixing drums on the trucks operate via power
take off from the truck engines. The concrete continues to be mixed as the
trucks deliver it to the customer. One hundred per cent of this batch plant's
output is sold to others by the manufacturer.
* The cement and water are committed to the manufacturing
operation at the mixing drum. The cement vacuum system, storage silo, and screw
conveyor are taxable.
* The aggregate is committed to the manufacturing operation
when materials handling (via the front loader) from initial storage ceases and
the aggregate is deposited on the conveyor which deposits it into the mixing
* The aggregate conveyor and mixing drum are not taxable.
* The manufacturing operation continues in the mixer truck and
is not completed until the concrete is discharged from the truck's mixer.
Because the truck's mixer operates by power take off from the truck engine, the
entire vehicle is production machinery and is not taxable.
A secondary smelter of aluminum uses a scale as part of an
automated process which measures out quantities of purchased aluminum scrap for
use in the casting process in the foundry. The aluminum is delivered to the
scale by a crane which removes the material from storage and puts it into a
hopper which feeds the scale.
* The aluminum scrap is a purchased material, not scrap which
is generated at this ma therefore, the equipment for its
storage and handling are taxable. This includes whatever storage facility is
set up for it and the crane.
* Because the raw material is committed to the manufacturing
process at the hopper, neither the hopper nor the scale is taxable.
An oil refinery obtains supplies of raw crude from numerous
sources. It stores this crude in various tanks, withdrawing samples from each
so that, in a laboratory in another part of the plant, it can conduct tests to
determine the composition of each lot. Subsequently, various crude is metered
and piped to another tank for blending to meet process specifications.
Thereafter, the blended crude is desalted to remove impurities such as bottom
sediments and water, and then is pumped to a preheat furnace to commence the
distillation process.
* The storage tanks in which the raw crude is placed upon
receipt are taxable. The fact that the tanks store the crude while laboratory
tests are being conducted upon the samples makes no difference to the status of
these tanks.
* The meters and piping used to transport the raw crude to the
blending tank are not taxable from the point of metering. The crude is
committed to the manufacturing process when it is metered after initial
* The equipment used to blend the crude is not taxable as the
crude has been committed to the manufacturing process.
* The storage and handling equipment used after the blending
tank is not taxable.
* The desalting equipment and preheat furnace treat the crude
in preparation for the manufacturing operation after is has been committed to
the process and are thus not taxable.
* The equipment used to test the raw crude is not taxable.
A cement manufacturer purchases limestone which is stored in
piles at its facility. Prior to committing the limestone to the process, the
manufacturer periodically hoses down the limestone to keep down the dust.
* This activity does not constitute refining. Consequently, the
hose and other equipment used to hose down the pile would be taxable.
A manufacturer makes roofing shingles. It first makes a paper
felt. This is passed through a saturator tank which contains asphalt that has
been heated with steam to a very high temperature. This saturates the felt with
the asphalt. The saturated felt is coat colored granules
are then applied to one side and talc to the other. The material is then cooled
and either cut to size or rolled up for shipment.
The colored granules are placed in storage when they are
purchased. When they are to be used, they are transported to the blending box,
where different colors are mixed together and applied to the roofing material.
The purchased talc is also placed in a storage tank and then is transported to
the manufacturing line by a series of pneumatic handling devices, which deposit
it into a hopper over the production line. It then falls onto the shingle
material passing underneath the hopper.
* The storage facilities for the granules and talc are taxable
as they are storing raw materials which will be incorporated into the product.
* The handling devices for both the granules and talc are also
taxable as they are handling raw materials from their initial storage and
before they are committed to the manufacturing process.
* The blending box is the point at which the processing
involving the colored granules begins, as the granules are mixed and applied to
the roofing material at that point. It is therefore not taxable.
* The talc hopper is also not taxable as it is the point where
handling from initial storage has ceased and the material is committed to the
manufacturing process.
A paper manufacturer makes special paper for use in full color
photocopying. The process to apply the paper coating must be done in a dust and
pollution free environment. Rolls of paper are passed through a machine where
the coating is applied and dried. This process occurs in a clean room, which is
separated from the rest of the plant by airtight partitions and ceiling coated
with an easily cleaned plastic. Three of the walls and the ceiling are free
standing and not part of the walls and ceiling of the
fourth wall, however, is a section of a wall of the larger structure. Employees
can only enter the clean room through two airlocks, which prevent dirty air
from entering. All air is filtered and regulated as to temperature and humidity
by heat pumps, electric heaters, dehumidifiers, and exhaust fans that serve
only the clean room and maintain a positive air pressure in the room. This
equipment is automatically controlled by a small computer using data from air
monitoring sensors in the room. Employees must wear disposable paper coveralls,
overshoes, and caps. The room has an intercom to minimize personnel traffic in
and out of the room. Lighting in the room is by normal fluorescent fixtures
attached to the ceiling.
* The paper coater is production machinery and is not taxable.
* The clean room, including the heaters, heat pumps, light
fixtures, etc., remains tangible personal property, since its special use
primarily serves the business rather than the real estate.
* Since the clean room provides environmental regulation in a
special and limited area, and such regulation is essential for the
manufacturing to occur, it is not taxable. This includes the partitions and
ceiling, airlocks, heat pumps, heaters, dehumidifiers, exhaust fans, ductwork,
air monitors, lights, regulating computer, and the special clothing used by the
workers to prevent product contamination within the room.
* The intercom is taxable.
In manufacturing glassware, molten glass is dropped into molds
in a forming machine, where it is spun into the desired form. The formed
glassware is released from the molds onto a conveyor where it gradually cools.
The conveyor enters and annealing lehr which tempers the glass. From annealing,
the glassware moves on a long conveyor which again allows it to cool. The
glassware is then sprayed with silicone which makes it scratch resistant.
* The manufacturing operation ends with the silicon sprayer.
A manufacturer purchases castings which will be a component
part of the manufacturer's product. The castings are received on trucks in
metal boxes on pallets. The pallets are unloaded by forklift and placed in
racks in the receiving area of the warehouse. As they are needed, a pallet is
removed from storage by a different forklift and moved to a cleaning process. A
worker removes the castings from the box by hand, placing them in a wire basket
that is attached to a counterweighted arm which allows the worker to lower the
basket into a tank containing chemicals which remove dirt, grease, and similar
contaminants. After dipping, the worker, who wears rubber gloves to protect her
hands from the strong chemicals, places the castings on a conveyor which moves
them to a grinding operation.
* The holding of the castings after receipt is initial storage.
Both forklifts and the storage racks are taxable.
* The castings have been committed to the manufacturing
operation when deposited by the second forklift at the washing operation. The
chemicals, dip tank, basket, and arm are not taxable, since they treat a
component part after materials handling from initial storage has ended.
* The conveyor that moves the castings to the first production
machine (the grinder) is not taxable because the continuous manufacturing
operation began at the dip tank.
* The rubber gloves used to protect the worker are taxable.
Example 10
A manufacturer of clay pipe uses forklift tractors to transport
the pipe from the machine in which it is formed to the kiln.
* The forklift tractors are used to handle an in-process
product and are are not taxable.
Example 11
A petroleum refinery produces an intermediate feed, such as
naphtha, which is temporarily stored. It eventually will be further processed
into a completed product which will be sold.
* The equipment used to transport the feed to and from the
storage tank, as well as the storage tank, are used to handle an in-process
material and are not taxable.
Example 12
Water purchased from a public utility is used by a refiner to
quench (cool) a gaseous product stream flowing from a distillation tower so as
to lower its temperature or convert it to a liquid for further processing.
Since the water does not touch the product directly, it does not need any
treatment to make it suitable for use in the manufacturing operation.
* The water is used in the manufacturing operation. Any
equipment used to handle it from the point where it enters the manufacturing
facility is not taxable. Any piping from the utility supply line is therefore
not taxable.
Example 13
A steel fabricator purchases coil steel. After the steel is
committed to the manufacturing operation, it is dipped in solvent to remove
dirt, oil, and grease. It is then further cleaned by dipping in an acid bath.
After fabrication is completed, the steel is sprayed with oil to prevent
formation of rust on the surface of the product. After the oil spray, the steel
is transported to the truck dock for loading and shipping.
* The solvent and acid are consumables used to prepare the
product during the manufacturing operation and are not taxable.
* The spraying of the protective oil on the completed product
constitutes the end of the manufacturing operation.
* The oil is a consumable which interacts with the product and
is therefore not taxable.
Example 14
A catalyst is used by a chemical manufacturer to facilitate or
cause a reaction between other chemicals during the processing operation.
* The catalyst interacts with the product, is an integral part
of the manufacturing operation, and is therefore not taxable.
Example 15
At a motor vehicle assembly plant, the manufacturer uses a bar
code system to track the flow of components. As components are received from
other manufacturing facilities or outside suppliers, a bar code label is
attached and then scanned with a wand to record it in the plant mainframe
computer, along with pertinent data keyed in by the employee to identify the
part. This computer is also used for various administrative functions. It does
not control the assembly line. Particular components are assigned to particular
vehicles, in order to assemble vehicles conforming to those ordered by dealers,
etc. After the vehicle is fully assembled, an employee scans all labels. A
printout is made that permits a comparison between what components were
supposed to be included in each vehicle and which components actually were
assembled. The label on the emissions equipment is also scanned prior to
emissions testing, in order to record the component in the emissions test data
base. Purchases include labels, label printers, scanners, printers, computer
terminals, and equipment to interface with the plant mainframe.
* This bar code system is primarily used to monitor the
progress of the product in the continuous manufacturing operation. The labels
and scanning wands are not taxable, except for first scanner and the scanner
used prior to emissions testing. The first scanner is used to record a part in
inventory and is therefore taxable. The scanner prior to emissions testing is
taxable because the vehicle is completed before it is used. The scanner is not
testing equipment.
* Since the bar code labels are used in the manufacturing
operation, the label printers are not taxable.
* The computer terminals allow employees to monitor the
progress of the scanned parts and are not taxable.
* The equipment that interfaces with the mainframe computer is
taxable. The computer printers, similarly, produce records of the information
and are taxable.
Example 16
The functioning of the melt furnace in a glass manufacturing
facility is monitored and controlled from an operator's booth, which is on a
raised platform about fifty feet from the furnace. Heat sensors in the furnace
are wired to the control booth, where the temperature data is drawn on a
continuous graph. The operator watches the graph and can adjust the furnace by
altering the flow of fuel (natural gas) or oxygen, batch material proportions,
or by adjusting the flue in the furnace stack.
* The sensors in the furnace monitor production and are not
* The control booth and the equipment and controls in it are
not taxable.
* The temperature graphing device which records the temperature
data is taxable since it functions as a recordkeeping device.
* The platform that supports the control booth is not taxable,
since it supports the operator of production machinery.
* The furnace stack and flue assembly within the stack are not
taxable, since they provide regulation of the furnace temperature.
Example 17
A manufacturer of high technology electronic equipment provides
its workers with microscopes which enable them to manipulate the components as
they are assembled into the product.
* The microscopes are not taxable because they are necessary
for the continuation of the manufacturing operation.
Example 18
A castings manufacturer upgrades its foundry by installing a
new computer controlled mold maker and an automatic caster. Because of their
size and weight, both machines require special concrete foundations. Casting
sand is blended to proper consistency with water and certain chemicals in a
muller. An auger moves the sand to a feed bin attached to the mold maker. Molds
are made automatically in accordance with computer instructions. The
instructions for each job are developed in the engineering shop using a
microcomputer and software which was purchased from the manufacturer of the
mold making equipment. The instructions are placed on a computer disk which an
employee carries to the computer that controls the mold maker. The completed
molds leave the molder on a conveyor which moves them to the caster.
* The mold maker and its foundation are not taxable, since the
molds are used in manufacturing the product for sale. The nontaxable equipment
includes everything from the sand muller to the exit of the molds from the mold
* The computer that controls the molder is not taxable.
* The purchased software and the computer in the engineering
shop are taxable, since they do not actually control the machinery.
* The conveyor that moves the molds from the mold making
process is taxable, since the molds do not enter the manufacturing operation
until they reach the caster.
* The caster is production machinery. The caster and its
foundation are not taxable.
Example 19
A paint manufacturer makes paint pursuant to customer
specifications. After a batch is finished, a sample is ladled into a quart jar
and taken to the lab for testing to assure adherence to the customer's specs.
In the lab, twenty cubic centimeters are placed in a beaker which is then
placed in a centrifuge. After centrifuging, the separated components of the
paint are examined under a microscope for content. The test results are
manually entered into a computer. The computer generates a printed report and a
label, both listing the test results and other information about the particular
paint batch, e.g., name of customer and date of manufacture. The label is
attached to the quart jar which contains the remainder of the paint sample. The
jar is placed in a storage cabinet where it is retained for five years.
* The testing procedure assures the quality of the completed
product and the equipment which is used in conducting the testing is not
taxable. This includes the centrifuge, beaker, and microscope.
* The ladle, quart jar, and the storage cabinet are not used in
testing nor in any other aspect of the manufacturing operation and are taxable.
In addition, the quart jar and storage cabinet are used primarily in a function
related to storage, record-keeping, and therefore are taxable.
* The computer, computer printer, and jar label are used only
to record the test results and are taxable.
Example 20
A manufacturer operates a job shop foundry where it melts
ingots of raw pot metal in an electric furnace. The molten metal is poured into
jacketed molds, through which water is circulated to speed up the cooling and
solidification of the metal. The water is pumped from a tank, chemically
treated, and conveyed by pipes to the molds. The heated water is filtered and
pumped from the molds to an outside cooling tower and then returned to the same
tank. Make-up water is pumped from a well on premises into the tank. The
treatment chemicals are stored in liquid form in a tank, from which they are
pumped and metered.
* The furnace and molds are part of the continuous
manufacturing operation and are not taxable.
* The water is an energy transmitting substance since it
removes heat from the manufacturing operation. The water treatment chemicals,
water pumps, pipes, well and cooling tower are not taxable. Since the water
tank is part of the recirculation system, it also is not taxable.
* The chemical storage tank, meter, and pump are taxable, since
they are merely storing or handling consumables prior to their initial use in
the manufacturing operation.
* Since the trucks are registered for highway use, they are
Example 21
A large manufacturing facility is located on three hundred
fifty acres of land on the outskirts of a large metropolitan area. The
production machinery and equipment is spread over several miles. The plant
property is divided at various points by a river, a railroad, and a public
highway. Work in process is moved from one production phase to another by large
licensed trailer trucks. A private bridge was constructed to cross the river, a
tunnel was constructed under the railroad, and the trucks cross the public
* This property is contiguous since the separations are only
public or private rights of way and not land used for other public or private
interests.
* Since the trucks are registered for highway operation, they
are taxable.
Example 22
A plastics manufacturer uses injection molds to form the
product. Excess plastic trim is knocked off the molds and collected on a
conveyor. The conveyor moves the trim to a grinder where it is reduced in size.
Another conveyor moves the plastic to a regrind bin where it is stored until
needed. The reground trim is manually removed from the storage bin in hoppers
and added, in certain proportions, to the purchased plastic pellets in the feed
bins for the mold injection presses.
* Since the trim is recycled back into the manufacturing
operation, the entire process of collecting, transporting, regrinding, and
reintroducing the trim is part of the manufacturing operation and not taxable.
The regrind storage bin is holding in-process product between stages of
production and is not taxable.
Example 23
A steel manufacturer operates two plants. Plant A produces
basic steel in a BOF furnace and has bar and hot rolled strip steel producing
lines. Plant B, located several miles away, produces cold rolled strip coils.
All production lines produce steel scrap in the form of trimmings or defective
product. At plant A, scrap from both lines is chopped to size and taken to a
storage area. When needed it is added back to the furnace to be again used in
steel production. The scrap from plant B is chopped to size and taken to plant
A where it also is used to make new steel.
* Since plants A and B are not contiguous, they are separate
manufacturing facilities.
* Since the scrap at plant A is returned to the furnace, all
items of property used to handle and store the scrap are not taxable.
* The equipment used to handle and transport scrap produced at
plant B is taxable since the scrap is transported to plant A for reuse.
* Since the choppers at both plants change the form of the
scrap, they are not taxable.
Example 24
During paper manufacturing, the fibers that will comprise the
finished paper product are put into a water solution. The water is drawn by an
intake pipe and pump from a river that flows next to the manufacturing
facility. The water is filtered and chemically treated and pumped into the
hydropulper where it is combined with wood chips and other fiber source
material. The resulting slurry is pumped to a fourdrinier which removes most of
the water by means of vacuum pumps. The water so removed, as well as slurry
that otherwise escapes the process is collected, since it contains usable
fibers. This slurry is returned to the hydropulper by pumps and pipes.
* The water is a consumable that is used in the manufacturing
operation. The river intake, pumps, filter, and chemicals are not taxable since
they either treat the water or transport the water from the point of extraction
at the river.
* The hydropulper and fourdrinier are production machinery and
not taxable.
* The slurry recovery and recirculating is part of the
manufacturing operation, since it recycles the product back into the
manufacturing operation at the same manufacturing facility. The pumps and
piping are not taxable.
Example 25
A plastics manufacturer generates steam in coal-fired boilers.
Eighty-five per cent of the steam is used to heat reactor tanks, in which the
first step in the manufacturing operation takes place. An insulated steam line
carries the steam from the boiler to the reactor vessels. Fifteen per cent of
the steam is diverted from the main steam line to heat the buildings in the
manufacturing facility.
The coal purchased to fire the boilers is received at a river
dock. The coal is unloaded from barges by a crane and is moved from the dock by
a conveyor belt to a conical storage tower. As needed, the coal is pushed by a
small bulldozer into a feed bin, which dumps the coal onto another conveyor
belt which moves it to a coal pulverizer. A screw conveyor moves the pulverized
coal from the pulverizer to a storage bin. Another screw conveyor removes the
pulverized coal from the bin and a forced air system injects it into the boiler
combustion chamber. The rate of injection is computer controlled.
Water for the boiler is pumped from the river, filtered,
chemically treated, and stored in a water tank outside the boiler building. As
the water is pumped from the storage tank, additional chemicals are added. Both
the water and the air used to inject the pulverized coal are preheated by means
of a heat exchanger in the boiler exhaust stack.
* Eighty-five per cent of the coal and boiler water chemicals
are not taxable, since eighty-five per cent of the resulting steam is used in
the manufacturing operation.
* The boiler and main steam line, including the latter's
insulation, are not taxable, since a majority of the steam is consumed in the
manufacturing operation. The line which carries steam for building heat is
* The coal unloading and handling equipment and the pulverizer
are not taxable. The conical storage tower and the pulverized coal bin are
taxable, since they merely store the coal.
* The forced air pulverized coal injection system is not
* The river water inlet, pumps, lines, filters, and treatment
chemicals are not taxable. The water storage tank is taxable.
* The boiler exhaust heat exchanger is not taxable.
* The computer that controls the pulverized coal injection is
Example 26
A manufacturer of ready-mix concrete uses a steam generator to
heat water which is used in mixing and warming component materials in the
manufacture of ready-mix concrete. The concrete is sold to construction
contractors and other consumers.
* The water is not taxable, as it transmits heat used in the
manufacturing operation and becomes part of the product produced for sale.
* The generator is not taxable as it makes the water suitable
for use in the manufacturing operation.
Example 27
A manufacturer of extruded rubber products uses injection
molding machines to force rubber through dies in order to form the desired
shapes. The molding machines are operated by compressed air. The air compressor
is fed air from an air dryer. The dryer is necessary to keep moisture out of
the air compressor lines and production machinery.
* The injection molding machines are not taxable as they are
production machinery which act upon the product.
* The air dryer and compressor are not taxable because they
make the air used to power the molding machines suitable for use in that
Example 28
A steel manufacturer uses coke in the production of iron. Coke
is a fuel which provides some of the heat required for smelting and it is also
the source of carbon, a necessary ingredient in the manufacture of steel, which
dissolves into the hot metal.
Coke is manufactured from metallurgical grade coal in a coke
plant. The coal is crushed, blended (high and low volatile coals are mixed) and
transferred to the ovens by means of conveyor systems. The crushed, blended
coal is placed in a larry car which runs across the top of the coke ovens and
charges the coal into the ovens. The coke battery consists of a series of ovens
lined with refractory brick which bake the coal to produce coke. The coke
battery is built from the ground up and does not have a separate foundation.
* The coke battery and the coal crushing, blending, and
charging systems, and larry cars are not taxable.
Example 29
A manufacturer buys a new coal pulverizer. The coal is fed to a
boiler to produce steam to generate electricity to power equipment used to
manufacture products.
* The pulverizer is used to make the coal suitable for use in
the manufacturing operation and is not taxable.
Example 30
A boiler is used to produce steam which primarily operates
machinery and equipment used in the manufacturing operation. Other equipment
feeds water into the boiler. This includes items such as pumps and a piping
system. There is also a system which filters and treats raw water drawn from a
creek running through the manufacturing facility.
* The boiler is used to produce power for the manufacturing
operation and is therefore not taxable.
* The water is used to transmit energy to the manufacturing
operation and is not taxable.
* The piping, pumps, filters, and water treatment equipment are
not taxable.
Example 31
A manufacturer installs an electrical distribution system,
including generators, transformers, electrical switchgear, cable and related
equipment. The electricity is used solely to produce and supply electricity to
the manufacturing operation.
* The entire electrical generation and distribution system is
not taxable.
Example 32
A manufacturer of specialty coil steel products uses natural
gas to heat annealing furnaces. The furnaces heat treat the manufacturer's
product and are part of the continuous manufacturing operation. In a field
owned by the manufacturer and adjacent to the plant, the manufacturer drills
two natural gas wells, using a drilling rig, trencher, and various other tools,
and installs drips, pumps, and transmission lines to provide gas for these
furnaces. The manufacturer also installs a gas line connected to the local
utility company line through which purchased gas is piped for heating the
buildings in the manufacturing facility. A branch line connects this purchased
gas line to the line going from the wells to the annealing furnaces, in order
to supplement, if necessary, the gas produced from the wells. One hundred per
cent of the well-produced gas is burned in the annealing furnaces. No more than
twenty per cent of the purchased gas is burned in the furnaces.
* The line connected to the utility's line is incorporated into
the real estate, since it primarily carries gas to heat the buildings. The
wells, pumps, transmission lines and associated equipment, and the branch line
remain personalty, since they carry gas for use in the manufacturing operation
* The wells, pumps, transmission lines and associated
equipment, and the branch line are part of the manufacturing operation and are
not taxable since they are extracting and transporting fuel used in the
manufacturing operation.
* The material for the line connected to the utility's line is
* The drilling rig, trencher, and other tools used to install
the well and gas lines are taxable.
Example 33
A manufacturer purchases pumping and filtering equipment and
related tanks and tubing to supply lubricating and coolant fluids to drilling
and cutting machinery. This equipment is used to recirculate the fluids so that
they may be reused in the manufacturing operation.
* As the fluids are being treated for reuse in the
manufacturing operation, the equipment which moves and treats the fluid is not
Example 34
A manufacturing operation uses water as a coolant in its
production operation. The water is continuously recirculated in a closed
system. The recirculation system includes a cooling tower and related pumps and
* As the water is a substance used in the manufacturing
operation, the recirculation system equipment is not taxable.
Example 35
The production of flatroll metal products requires that an oil
mixture, which serves as both a rolling lubricant and a coolant, be
continuously sprayed on sheets in the rolling mill. Spent oil is simultaneously
removed and passed through a filtering process which is interconnected with the
rolling mill, after which the oil is resprayed onto the sheets.
* The rolling mill is a production machine and is not taxable.
* The oil filtration machinery trea
therefore, this equipment is not taxable.
Example 36
A manufacturer of truck and tractor engines uses what are known
as wet machines in its engine head and block assembly lines. These machines
require the presence of a liquid coolant to operate. In the absence of such a
coolant the machines would heat up rapidly, ultimately destroying the tool and
the part being machined. Therefore, the interface between the tool and the
block or head is flooded by spraying it with liquid coolant, a water soluble
In order to save on the expense of the oil, the manufacturer
devised a system to recapture the used liquid. After the coolant is sprayed on
the component, it drops through a funnel-like chamber into an underground
trough. The coolant collects in a u-shaped channel along with the scrap metal
chips and dust produced by the machining operations. The coolant is conveyed
through the underground trough by means of air pressure to a collecting tank
outside the plant where a conveyor lifts the bigger chips from the coolant.
These chips then enter a chipwringer which wrings out excess coolant. From the
tank, the coolant is pumped back into the plant through a series of pipes.
Along the way, it passes through a series of filters which removes any
remaining metal particles. Thereafter the coolant is returned to the machining
lines where the process begins anew.
* The entire recirculating system is not taxable. The oil is
used in the manufacture of the engine heads and blocks. The recirculating
system is used to filter this oil to make it reusable for the manufacturing
operation. The substances are in fact intended for reuse and not for disposal
Example 37
A producer of alloy steel uses an acid solution to pickle its
products. The pickling process removes scale. After pickling, the used acid is
filtered to remove impurities. The filtered solution is then pumped into a tank
where pure acid is added to the solution in order to raise the acid content.
From this tank, the solution is pumped and piped into the pickling tanks. After
the acid is reused a certain number of times it can no longer be purified and
strengthened sufficiently to be economically useful. It is therefore
transported through a series of pipes to an acid disposal plant, where the acid
is neutralized by mixing it with lime in a tank designated the neutralizing
tank. The mixture is then pumped into a sludge pond.
* The acid solution would not be taxable as it interacts with
the product. The pickling tanks are production machinery and thus also not
* The pipes from the pickling tanks through the filtration
system are not taxable, as this is a treatment system which makes a substance
used in the manufacturing operation reusable, and the substance is in fact
intended for reuse.
* The piping system used to transport the spent acid to the
acid disposal plant, the pump into the neutralizing tank, the tank itself, the
lime, and the pumps and pipes used to dispose of the neutralized solution are
taxable under this rule as at this point the substance is not intended for
Example 38
An automobile manufacturer has a plant which stamps out steel
to make automobile body parts. The manufacturer employs an engineering firm to
procure and generally oversee the installation of a cold press machine which
presses sheet metal into doors. The engineering firm contracts out the labor
for installation of the piece of production machinery in the manufacturer's
plant. The contractor which installs the machine bills the manufacturer
* The charges from the contractor for the services to install
the machine are not taxable as they involve the installation of an item used
primarily in a manufacturing operation to produce tangible personal property
Example 39
A manufacturer builds and furnishes a new administration
building. The building contains offices for executives and the personnel and
accounting department. The manufacturer leases a computer to process personnel,
payroll, accounting, and billing information.
* All office equipment and furnishings located in the
administration building are taxable.
* The computer is taxable.
Example 40
A food processor has an automated batch system for dry
ingredients. The ingredients are received from outside suppliers on pallets in
bags, cartons, paper drums, etc. They are moved from the receiving warehouse
area by forklift, which deposits the pallets near the dry batch mixer. Some
ingredients are dumped by employees directly into the mixer. Some are dumped
into feed bins which discharge directly onto a scale. The proper amount of
ingredient per batch is programmed into the scale by an employee. The scale
controls the feed bins, opening them in turn and shutting them when the proper
weight is reached. The dry ingredients are mixed and discharged by a covered
conveyor to the next stage, where water is added.
* The dry ingredients do not undergo a change in state or form
un however, the manufacturing operation begins as to the
dry ingredients when they are dumped into the feed bins or directly into the
dry batch mixer, since they have been committed to the manufacturing operation
when the materials handling (via the forklift) from the warehouse ceases. Thus,
the bins, mixer, and scale are not taxable.
* The forklift is taxable.
Example 41
A manufacturer uses a forklift primarily to move finished goods
from a storage warehouse and load them on trucks for shipment to customers.
* The tangible personal property in the warehouse and the
forklift are taxable, since they are storing or handling a completed product.
Example 42
A manufacturer purchases storage equipment for the purpose of
storing raw materials prior to commitment to the manufacturing operation
includes tanks, racks, holding bins, and similar equipment.
* Such storage equipment is subject to tax.
Example 43
A fiberglass manufacturer generates fiberglass waste as part of
its manufacturing process. The waste is collected in various ways, including a
vacuum system with collection hoses that permit workers to clean up small
particles. The vacuum system deposits the fiberglass into a holding bin. Larger
pieces, including rejected material that fails quality assurance testing, is
transported in skid boxes by lift truck. All waste fiberglass is baled and
transported by the manufacturer's trucks to a landfill for disposal. All
employees in the plant are required to wear masks to prevent them from inhaling
glass fibers.
* Since the waste fiberglass is not sold or recycled by the
manufacturer, the baler and all of the handling equipment, including the vacuum
system, is taxable.
* The protective masks worn by the employees are taxable.
Example 44
Replacement parts for production machinery are kept in storage
bins in the plant storeroom.
* While the parts are not taxable, the storage bins are
Example 45
A manufacturer has its employee parking lot repaved. It
separately purchases the required materials and contracts the labor.
* The materials incorporated into the parking lot are taxable
as the lot is real property. The labor is not taxable as it pertains to an
improvement to realty. Had the manufacturer entered into an agreement whereby
the contractor provided both material and labor, there would be no direct tax
consequences to the manufacturer.
Example 46
A manufacturer purchases a heating system and other related
parts to be incorporated into a manufacturing facility. The heating system will
provide heat and serve solely for the building.
* The heating system and all related parts purchased will be
taxable since it is used to produce heat for the building and not used in any
manufacturing operation.
Example 47
A manufacturer of unassembled furniture has an extensive dust
collection system throughout the manufacturing facility. Collecting units are
located over the boring mills, saws, edgebanders, planes, and other places in
the plant. Fans and ductwork exhaust the dusty air through a series of filters.
The saw dust falls from the filters into movable hoppers. These hoppers are
periodically dumped into a mixer, where the saw dust is blended with a small
amount of liquid adhesive. The mixture is removed from the mixer by a screw
conveyor to a press which forms it into briquettes which the manufacturer
sells. The briquettes fall onto a conveyor belt which moves through a heat
tunnel which causes rapid drying.
* The entire dust collection system is taxable, since it
provides environmental control throughout the entire manufacturing facility.
* The portable dust hoppers are taxable, since they are
handling a waste product.
* The adhesive, mixer, screw conveyor, press, belt conveyor,
and heat tunnel are not taxable, since they are used to manufacture a product
Example 48
A manufacturer makes various kinds of candy canes. The process
requires that temperature and humidity in the plant be maintained within
certain narrow parameters.
* Since the temperature and humidity are regulated in the plant
as a whole, rather than a special, limited area within the plant, all the
equipment used to provide such regulation is taxable.
Example 49
A manufacturer of automotive parts paints the parts as part of
its manufacturing process. The painting is done in paint booths, which are
enclosures containing ventilation and other equipment that provide the booth
with a controlled atmosphere so that paint is applied to each piece under
nearly identical conditions, resulting in a uniform product. The paint is
applied by a spraying system which results in a considerable amount of
overspray. To flush this excess paint from the booth, a water spray flows
through continuously. The water is drained from the booth into a treatment
system which filters out the paint. Neither the paint nor the water is reusable
in the }