Laws, Regulations & Annotations
Business Taxes Law Guide – Revision 2013
Sales and Use Tax Annotations
440.0000 PROPERTY USED IN MANUFACTURING—Regulation 1525
(a) MANUFACTURING AIDS
(1) In General
440.0040 Basic Application of Tax—Purchasing as Agent or for Resale—Evidence. X, a manufacturer of aircraft parts under contract with Y, an aircraft manufacturer, purchased materials to fabricate tooling which it used to manufacture the parts. X paid use tax on the cost of the materials, claiming to have purchased them as agent, and that it did not actually sell the tooling to Y. It was, however, concluded that X actually sold the tooling to Y and was liable for tax on the selling price of the tooling under evidence that: Y depreciated, and took an investment credit on, the tooling; X, under its contract, retained legal title to the tooling as security for payment of the price; X charged for the tooling the charge including fabrication labor, materials, overhead and general administrative costs, and profit. Under the contract Y had all the benefits of ownership in the tooling, and a rigid right of control over its use and disposition by X, who was referred to as contractor and supplier of tooling. 4/7/70.