Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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347.0000 MANUFACTURING EQUIPMENT—Regulation 1525.2

Annotation 347.0200

347.0200 Commence Business Activity. An individual has been employed for many years as a mold maker for Company A. In July 1994, the individual acting in the capacity of a sole proprietor/independent contractor and not as an employee of Company A made molds for Company B using Company A's equipment. The individual also applied for a seller's permit in July 1994 specifically for this operation. In August 1995, the individual bought mold making equipment and set them up in his garage. In February 1996, he quit his job with Company A and started his own business as a mold maker.

A person begins a trade or business activity when that person first conducts the activities for which that trade or business was organized. This can occur at any time based on the nature of that person's activities. At a minimum, the acquisition of operating assets necessary for the type of business contemplated constitutes "commencing activities." However, the acquisition of operating assets is not the sole factor in determining when a person first conducts trade or business activities. The true test is when that person first conducts the activities for which it was organized.

Here, the individual first undertook activities in the trade or business activity of a mold maker in July 1994 when he applied for a seller's permit to make molds and contracted with Company B to provide it with molds. The fact that he did not acquire his own operating assets until August 1995 does not alter the fact that the individual's mold making activities actually began in July 1994. Therefore, the commencement date for the business activity is July 1994 and the partial sales and use tax exemption certificate is valid for a three-year period commencing on that date. 7/9/97.