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Revenue Administrative Bulletin 1988-14Approved: June 10, 1988
INDUSTRIAL PROCESSING: 1987 AMENDMENTS TO THE SALE AND USE TAX ACTS
RAB-88.14. The Department of Treasury hereby issues the following interpretation of the 1987 amendments to the Sales and Use Taxes regarding Industrial Processing.
In June 1987, P.A. 87 and P.A. 141 were passed amending the Sales Tax Act and the Use Tax Act, respectively. Under the laws:
Definition of Industrial Processor
The amendments define an "industrial processor" as "a person who transforms, alters, or modifies tangible personal property by changing the form, composition, or character of the property for ultimate sale at retail or sale to another industrial processor to be further processed for ultimate sale at retail."
Computers and Computer Equipment Used in
The exemption from sales and use taxes on purchases of computers and computer equipment used in industrial processing and computer-assisted design/computer-assisted manufacturing can be claimed by a person whether or not that person is an industrial processor. That is, the amendments grant the exemption to purchases of computers and computer equipment based on use, rather than on who owns the computers and computer equipment. The following uses of computers and computer equipment are specifically exempted from sales and use taxes:
The amendments specify that exemptions from sales and use taxes on purchases of computers and computer equipment used in industrial processing take effect after December 31, 1984. Taxpayers who believe that their computer and computer equipment purchases after the date qualify under one of the above four categories may apply to their vendors for reimbursement of sales tax paid. The vendors may then apply to the Department for a credit or refund. Taxpayers who have paid Use Tax directly to the Department may apply to the Department for a credit or refund of tax paid. All requests for refunds shall be accompanied by supporting documentation.
Purchases of computer paper, supplies, electricity, etc. used in computer-assisted design/computer-assisted manufacturing by a person performing a service for manufacturer are taxable.
Persons Performing Services for Industrial Processors
A person who is providing a service for an industrial processor does not "transform, alter, or modify tangible personal property by changing the form, composition, or character or the property for ultimate sale at retail or sale to another industrial processor for further processing for ultimate sale at retail" is a servicer and is not an industrial processor. For example, an industrial processor may contract with a waste disposal company to remove waste from the manufacturing plant premises. The waste disposal company, no matter what the importance of its activities to smooth operations at the manufacturing plant, does not meet the definition of an industrial processor itself. It is not processing anything for ultimate sale at retail or sale to another industrial processor for further processing for ultimate sale at retail. Thus, purchases of any equipment, materials, and other items used by the waste disposal company in performing the waste removal service for the industrial processor are not eligible for an industrial processing exemption from the sales or use taxes.
The exception to this provision is where the person performing the service for the industrial processor has purchased computers and computer equipment to be used in industrial processing in one of the four ways described above.
Any questions regarding the amendments to the industrial processing exemption sections of the Sales and Use Tax Acts may be directed to:
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