Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2015
Sales and Use Tax Annotations
435.0000 PRODUCING, FABRICATING AND PROCESSING PROPERTY FURNISHED BY CONSUMERS—GENERAL RULES—Regulation 1526
(c) MISCELLANEOUS OPERATIONS
435.0479.125 Alteration and Repair of Dies. Changes to a die used to produce cardboard boxes, such as the removal or addition of locking tabs, are taxable fabrication labor because the boxes produced from the altered die will differ from the boxes produced by the die prior to alteration. Similarly, changes to a die from round cornered tabs to square-cornered tabs or vice-versa constitute taxable fabrication labor. A replacement of a ¾-inch steel rules with a ½-inch steel rules "in order to make the die work better" is nontaxable repair labor if the boxes produced by the changed die are identical to the boxes produced before the change was made.
Where a company attributes five hours to refurbishing a die (replacement of worn out parts) and three hours to modifying the die (removal of two locking tabs and the addition of two scores) and the company does not itemize the two labor charges on the invoice, tax does not apply to the five hours of repair labor provided the company provides documentation sufficient to show that the proration is reasonable and reflects the work actually done. If the company cannot document its claim that part of the charges are nontaxable repair labor, then the entire charge is subject to sales tax.
Where the company refurbishes all of the dies for a major customer and alters (new vents added) 33 of the dies, no tax is owing for the dies that were only refurbished. As to the dies which were both refurbished and altered, no tax is owing for that portion of the labor attributed to the refurbishment provided adequate documentation is provided to support the claim. If the documentation is inadequate to support this claim, the entire charge for the changes to the 33 dies is subject to tax. 10/10/89.