Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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440.0000 PROPERTY USED IN MANUFACTURING—Regulation 1525

Annotation 440.0045

(a) MANUFACTURING AIDS

(1) In General

440.0045 Basic Principles in Determining Purpose for Purchase. In determining the primary purpose of a manufacturer's purchase of chemicals, the fact that the chemicals have a beneficial effect on the manufacturer's finished product is not determinative. Any chemical utilized by a manufacturer during the manufacturing process, regardless of whether it is purchased for use as a manufacturing aid or for incorporation in the final product, will necessarily have some beneficial effect on the final product. Otherwise, the manufacturer would not utilize the chemical at all. In order to prove that the primary purpose is incorporation into the finished product for resale, therefore, it must be shown not only that the chemical has beneficial effects, but also that such effects result from the physical presence of the chemical in the finished product and not merely use of the chemical in the manufacturing process.

For the same reason, proof that a chemical remains in the finished product is also not determinative. If the physical presence of the chemical in the finished product has little or no beneficial effect, there is no basis for concluding that the chemical was purchased for the primary purpose of resale as a component of the finished product. On the other hand, if use of the chemical during the manufacturing process brings about chemical or physical reactions which benefit the finished product, it is reasonable to conclude that the chemical was purchased for the primary purpose of causing such reactions during the manufacturing process even though the chemical happens to remain in the finished product. 6/28/83.