Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2015

Sales and Use Tax Annotations

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Annotation 295.0728


295.0728 Tooling Evaluation. A manufacturer manufactures molds which it uses to produce wheels for automobiles. The molds are sold prior to production of the wheels. The molds are evaluated before and during production. The question is whether the charges for these evaluations are services that are a part of the sale of the mold, which is subject to tax, or related to the wheels which are sold for resale.

In this instance, these charges for evaluation are services that are part of the sale of the wheels and therefore are sales for resale. The conclusion is based on the following: the engineering specifications which have been submitted outline a comprehensive wheel testing program from pre-production through production. The goal is repeatedly described as providing an evaluation of "design intent" of the wheel. If any requirements of the tests are not met, the result could be changes in tool design, or changes in material composition, or changes in manufacturing process. Thus, the mold is incidentally being tested along with the manufacturing process and the material composition, but the ultimate goal of the testing is to validate the wheel. This conclusion is supported by the fact that the wheel validation test are not performed for all customers who purchase wheels even though the tooling for each is the same. This fact indicates that the validation tests are not required for the tooling itself. 8/5/93.