Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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195.0000 CONTAINERS AND LABELS—Regulation 1589

Annotation 195.2117


195.2117 Use Prior to Sale—Laboratory Labels. A lighting manufacturer places an order with a label printer for labels which contain a provision that certifies the lighting fixture has been tested by a certain laboratory. The purchase order together with a resale certificate is sent to the printer by the manufacturer. In turn, the purchase order is sent to the laboratory by the printer to confirm that the products have been tested. The laboratory then tells the printer what issue numbers to print on the labels. The labels are printed and then sent to the laboratory. The labels are checked by the laboratory to see that product identification and issue numbers are correct. The labels are then sent to the manufacturer who places the label on the product. The printer sends the bill to the laboratory and a copy to the lighting manufacturer. The manufacturer pays the laboratory for the testing and for the labels. In turn, the laboratory pays the printer for the labels.

There was no taxable use of the labels by the laboratory since all it did was to inspect the labels and ship them on to the manufacturer who affixed them to the property. Accordingly, the transaction between the printer and the laboratory qualified as an exempt sale for resale. Also, the sale of the labels to the lighting manufacturer by the laboratory is exempt from tax since the manufacturer affixed the labels to property to be sold and sold them along with and as a part of the property. 4/30/81.