Laws, Regulations & Annotations

Business Taxes Law Guide – Revision 2018

Sales and Use Tax Annotations

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495.0000 SALE

Annotation 495.0197


495.0197 Conversion of Raw Sulfur. A taxpayer has sulfuric acid agreements with various oil refiners which provide for the conversion of the customer's raw sulfur or spent acid into fresh sulfuric acid at conversion prices covering only the processing charges. Shipments of fresh acid are made from the taxpayer's plants and by outside vendors (subcontractors) under purchase orders issued by the taxpayer "for exchange of, or purchase of, sulfuric acid on a resale basis." Shipments from the taxpayer's plants have also exceeded the quantities of raw materials furnished by the oil refiners for conversion.

The application of tax is as follows:

Shipment from taxpayer. To the extent that the refiner has, contemporaneous with the shipment of fresh acid, a credit balance of sulfur with the taxpayer, tax applies only to the conversion or other charges made by the taxpayer to the oil refiner, and not to the value of the customer furnished sulfur.

To the extent that the sulfur component of the fresh acid exceeds the sulfur credit balance maintained at the time of shipment of the fresh acid, tax applies to all conversion and other charges made by taxpayer and to the amount allowed for the sulfur subsequently furnished to taxpayer by the oil refiner in settlement of its "deficit" account.

Shipment from subcontractor. In cases where shipment of the fresh acid is made by a subcontractor (or by the contractor from a location other than the location where customer furnished spent acid is maintained), tax applies to both the conversion charges and the trade-in value of the spent catalyst furnished by the oil refiner. It is immaterial that the contractor may receive the spent acid prior to the time the fresh acid is shipped since there is no possibility that the oil refiner will receive, as a component of the fresh acid, materials furnished by the oil refiner to the contractor as a component of the spent acid. 4/8/71.