Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2013
 

Sales and Use Tax Annotations


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P

440.0000 PROPERTY USED IN MANUFACTURING—Regulation 1525

Annotation 440.2570

(b) PROPERTY BECOMING COMPONENT PART OF FINISHED PRODUCT

(4) Miscellaneous Specific Components

440.2570 Blowing Agents—Manufacture of Food Containers. A manufacturer of plastic-rubber food containers purchases sodium hydrogen carbonate (aka sodium bicarbonate), citric acid and stearic acid calcium (aka calcium stearic). The products are purchased by the manufacturer as a combined product. In the course of the manufacturing process, the sodium bicarbonate disappears. The stearic acid causes the cells of the rubber and plastic to remain in small sizes so that the eventual product is smooth and then it disappears. Carbon dioxide bubbles are trapped in the plastic-rubber mixture and remain there. As the product is heated the citric acid decomposes.

Ordinarily, sodium hydrogen carbonate is property purchased for resale. The primary purpose for this product is to decompose it to extract carbon dioxide bubbles for incorporation into the product. On the other hand, the citric acid and stearic acid calcium were used as manufacturing aids and purchases of these items would be subject to tax. However, since the three products are purchased as one combined product from the supplier and 50 to 52 percent of the combined product was sodium hydrogen carbonate, the principal purpose for acquiring the product was for incorporation into the finished product and it is properly purchased for resale. 3/27/95; 5/16/95.