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Comparison of sales/use tax exempt and nonexempt items California, Texas, Florida, and New York.

PANEL 1: MANUFACTURING, PROCESSING, AND FABRICATING

CALIFORNIA

Exempt

* Tangible personal property consumed in manufacturing that becomes an ingredient or component part of the manufactured item

* Oak barrels, new or used, if purchased for the purpose of physically incorporating into wine or brandy to be sold

* Chemicals, if they become an ingredient or component part of the manufactured item

* Charges for painting, polishing, and finishing real property

* Sale of paint and other materials to a repainter/refinisher of used property for resale as a regular business

Nonexempt

* Tangible personal property consumed in manufacturing that does not become an ingredient or component part of the manufactured item

* Manufacturing equipment for use in any stage of manufacturing, processing, refining, fabricating, or recycling (purchases by a new trade or business had been partially exempt before 2004)

* Manufacturing aids (such as dies, patterns, jigs, and tooling) used in the manufacturing process, unless the sales contract states that title to such items passes to purchaser before being used in the process

* Sale of paint and other materials to a repainter/refinisher of used property; the refinisher is considered the retailer

* Charges for painting, polishing, and finishing tangible personal property in connection with production of a finished product for consumers

TEXAS

Exempt (if sold, leased, or rented to, or stored, used, or consumed by, a manufacturer)

* Tangible personal property consumed in manufacturing, processing, or fabricating that does become an ingredient or component part of the manufactured item

* Tangible personal property directly used or consumed in manufacturing, processing, or fabricating of a manufactured item if the use or consumption is necessary or essential to the operation and makes or causes a chemical or physical change to either the manufactured product or any intermediate product

* Tangible personal property used or consumed in manufacturing and necessary or essential to the pollution control process, quality control process, or compliance with federal or state public health requirements

* Tangible personal property specifically installed to reduce water use, reuse and recycle wastewater streams generated by manufacturing process, or treat wastewater from another industrial source for the purpose of replacing other freshwater sources used in manufacturing

* Lubricants, chemicals, compounds, gases, or liquids used or consumed during manufacturing if necessary and essential to prevent the decline, failure, lapse, or deterioration of exempt equipment

* Gases used on premises to prevent contamination of raw materials or to prevent fire, explosion, or other hazardous situation at any stage of the manufacturing process, including loading or storage of the product or raw materials

* Chemicals used during manufacturing operations to produce or induce a chemical or physical change, remove impurities, or to make the product more marketable (including sulphur)

* Services performed directly on the product being manufactured prior to distribution for the purpose of making it more marketable

* Steam production equipment and its fuel; boilers and oil or gas burning equipment related to boilers and any accessories used to power, supply, support, or control such equipment

* Equipment used to generate electricity, chilled water, or steam for ultimate sale

* Gas and electricity used directly in manufacturing

* Wrapping, packing, and packaging supplies used to further the sale of the manufactured product

* Display items and raw materials used to make such items, if only used for demonstration prior to sale

* Safety apparel or work clothing used during the manufacturing, processing, or fabrication of tangible personal property if manufacturing would not be possible without its use and the apparel is not resold to employees

* Divergent use of otherwise exempt property does not result in tax if it occurs more than four years after purchase

Nonexempt

* Machinery, equipment, replacement parts, and accessories that are rented or leased for less than one year, including tangible personal property which would otherwise meet qualification

* Intraplant transportation equipment

* Maintenance or janitorial supplies or any other machinery, equipment, materials or supplies used incidentally in manufacturing, processing, or fabrication that are not otherwise exempt

* Hand tools

* Office equipment or supplies used in sales or distribution, research and development of new products, or transportation activities, as well as any other tangible personal property not used in actual manufacturing

* Machinery and equipment used to maintain or store tangible personal property and not otherwise exempt

* Tangible personal property used in transmission or distribution of electricity

FLORIDA

Exempt

* Sale, use, consumption, or storage of industrial materials, chemicals, and fuel used in future processing, manufacturing, or conversion into tangible personal property for resale where industrial materials become component parts of finished product

* Machinery and equipment purchased for exclusive use by a new business (or expanding by not less than 10%) in spaceport activities

* Machinery and equipment purchased for use in new business (or expanding by not less than 10%) to manufacture or produce tangible personal property for sale at fixed locations; purchases must be made before productive operations begin and delivery must occur within 12 months of purchase

* Industrial machinery and equipment purchased by expanding business (not less than 10%) manufacturing tangible personal property pursuant to federal procurement regulations at fixed location in the state

* Industrial machinery and equipment used as an integral part of manufacturing tangible personal property for sale or exclusive use in spaceport activities; does not include building and structural components such as heating and air conditioning systems

* Machinery and equipment used by a new or expanding business in phosphate or other solid minerals severance, mining, or processing operations; credit allowed if certain qualifications met

* Machinery and equipment used in production of electrical or steam energy at a fixed location in the state; not including burning of residual oil; energy must be used primarily for manufacturing, processing, compounding, or producing tangible personal property for sale in the state

* Machinery and equipment used in semiconductor, defense or space technology production and research and development

* Machinery and equipment used primarily for research and development

* Machinery, equipment, and other materials used for renewable energy technologies (through July 1, 2010)

* Labor and parts used in repairing certain industrial machinery

* Boiler fuels used in manufacturing process at fixed location in the state (does not include users regulated by Division of Hotels and Restaurants)

* Electricity or steam used at a fixed location in the state to operate machinery and equipment used to manufacture, process, produce, or prepare for shipment items of tangible personal property for sale

* Electricity or steam used to operate pollution control equipment, recycling equipment, maintenance equipment, or monitoring/control equipment used in manufacturing tangible personal property for sale (applies only to certain industries)

* A number of other specific materials used by a variety of industries

Nonexempt

* Cost of product produced for own use, including materials, labor, service, and transportation costs

* Producing, fabricating, processing, printing, or imprinting of tangible personal property; includes materials that are cut, threaded, shaped, bent, polished, welded, sheared, punched, drilled, machined, or otherwise changed from original state

* Machinery and equipment sold or used in manufacturing, processing, or furnishing communication, transportation, or public utility services, unless specifically exempted

* Sale, use, consumption, or storage of tangible personal property, including machinery and equipment or parts, electric power, fuels (except boiler), and other energy used to power machinery used or dissipated in processing, manufacturing, or conversion

* Fuels used and dissipated in fabricating, converting, or processing tangible personal property

* A number of other specific materials used by a variety of industries

NEW YORK

Exempt

* Services of producing, fabricating, and processing when bought for resale or used or performed on property intended for resale

* Purchases of tangible personal property for use in performing services on property intended for resale

* Machinery or equipment used or consumed in producing tangible personal property, gas, electricity, refrigeration, or steam for sale

* Parts, tools, and supplies used or consumed in producing tangible personal property, gas, electricity, refrigeration or steam for sale

* Machines used to produce other machinery or equipment for self-use in production (e.g., machines used to produce molds)

* Parts, tools, and supplies used in oil or gas production

* Machinery and equipment used at qualified New York City marine terminal facilities in predominantly in loading, unloading, and handling cargo

* Materials sold as a physical component part of property manufactured or processed

Nonexempt

* Services of producing, fabricating, and processing when performed for a person who directly or indirectly furnishes the property

* Machinery and equipment partly used in administrative and distribution phases unless "directly and predominantly" used in production (over 50% of use directly in production phase)

* Manufacturing raw materials (wood, metal, rubber, minerals) considered tangible personal property and thus taxable unless specifically exempted

PANEL 2: CONTAINERS, WRAPPERS, PACKAGING, AND LABELS

CALIFORNIA

Exempt

* Sales of, and the storage, use, or other consumption of, non-returnable containers when sold or leased without the contents to persons who place contents in them and sell the two together or who place food products for human consumption in them for later sale

* Sales of, and the storage, use, or other consumption of, returnable containers when sold with the contents in connection with a retail sale of the contents or when resold for refilling

* Labels or nameplates affixed by the purchaser to the property or non-returnable containers to be sold

* Feed analysis tags attached to containers and sold along with the container and contents

* Feed bags sold to dealers who place feed in the bags and sell together; considered non-returnable containers

* Ice or dry ice used in packing, shipping, or transporting food products for human consumption

* Carbon dioxide used in packing or shipping fruits and vegetables for human consumption

* Wax and fungicide, post-harvest protective shields, protective coatings, salt, acids, and caustics physically incorporated into the final products

* Preservatives

Nonexempt

* Price tags, shipping tags, and advertising matter used in connection with the sale of property or enclosed with property sold

* Gift wrapping

* Property used in conditioning goods to be shipped or to protect and preserve during transportation including bracing materials, car strips, cleaning and degreasing compounds, lumber, ice, preservatives, salt, and solvents

* Property used as containers or parts of containers of goods shipped when shipper is not the seller of the contents

TEXAS

Exempt

* Packaging supplies purchased for resale "as is" and not as part of a packaged product

* Containers sold with their contents if the sales price of the contents is not taxed

* Non-returnable containers sold without contents to someone who fills the container and sells the contents and the container together

* Returnable containers sold with their contents or resold for refilling

* Laundry or drycleaner wrapping, packing, and packaging supplies for use by a person operating as a laundry or drycleaner in the regular course of business

* Containers and packaging supplies purchased by the manufacturer for completion of the manufacturing process

* Newspaper packaging used for wrapping, packing, or packaging newspapers

* Crating and packing supplies used by packers to export personal property

Nonexempt

* Internal or external wrapping, packing, and packaging supplies used with tangible personal property or in performing a service to further the sale of the tangible personal property or the service

* Packing supplies and gift wrapping sold to persons who repack tangible personal property before sale

FLORIDA

Exempt

* Materials, containers, labels, sacks, bags, or similar items provided such packaging is intended to accompany a product sold to a customer without which delivery would be impracticable and intended to be used once for convenience of purchaser

* Paper products, straws, and wooden and plastic spoons and forks when sold to a buyer for use in operating a place licensed by Division of Hotels and Restaurants

* Packing inserts, individual folding boxes, and set-up boxes sold to manufacturers or producers to accompany their products

* Instruction books, direction sheets, and manuals sold to manufacturers, producers, wholesalers or retail merchants to be supplied with product at no extra charge

* Paper bags purchased by a store for distribution for no charge

* Egg cartons used in final purchase

* Coat hangers and garment covers for delivering to consumer for no added charge

* Wax that becomes part of a carton

* Skewers used by meat shops/butchers

* Single-use plastic stir sticks

* Pallets for one-time use for property to be sold and shipped

* Ice and salt placed directly in shipping containers with perishable food commodities

* Shipping labels that carry instructions and labels purchased by manufacturer and affixed to product

* Price tags that accompany items sold

Nonexempt

* Instruction books, direction sheets, and manuals sold to manufacturers, producers, wholesalers or retail merchants to be supplied for an extra charge

* Barrels, bottles, boxes, bags, cartons, or similar containers in which tangible personal property is sold and where seller retains title and container is returned to seller

* Boxes, wrapping paper, twine, tape, and similar items when sold to persons who use them to render services and are not required to collect tax on such services

* Gift wrapping charges by stores

* Cartons, boxes, and containers designed to be used more than once

* Reusable containers

* Price tags retained by the merchant

* Steak markers

* Milk cans used for shipping to consumers

* Coat hangers used on store display racks

* Crating, pallets, and other supplies sold to warehousemen

NEW YORK

Exempt

* Sale of cartons, containers, wrapping, and packing materials and supplies, including components used or consumed by the vendor in packaging tangible personal property for sale and transferred with the product to the purchaser (such as bags, barrels, baskets, bindings, bottles, boxes, cans, cartons, cellophane, coating and preservative materials, crates, cylinders, drums, glue, gummed labels, kegs, lumber used for blocking, pails, pallets, reels, sacks, spools, staples, string, tape, twine, wax paper, and wrapping paper)

* Restaurant cups, plates, and containers for hot and cold drinks purchased for resale and transferred to the buyer (such as wrappers, lids, sleeves, disposable plates, and paper bags)

* Milk crates purchased by dairy farmers or licensed milk distributors used exclusively for packaging and delivery of milk

Nonexempt

* Returnable containers (such as drums and barrels purchased at retail where ownership is not transferred, cartons bought by vendor for own use or consumption, racks used to facilitate delivery but not transferred with the product to the purchaser, and packaging materials used in conjunction with exempt services)

* Restaurant supplies such as napkins, straws, stirrers, and plastic knives, forks, and spoons

PANEL 3: REPAIR, MAINTENANCE, AND INSTALLATION SERVICES

CALIFORNIA

Exempt (generally)

* Charges for labor and services to install or apply property

* Installation charges

* Repair labor

* Repair work as part of mandatory lump-sum maintenance contract for parts, labor, and material; the repairer is regarded as a retailer so sale of parts and materials is exempt

Nonexempt (generally)

* Cost of labor and services when fabricating property in place

* Parts and materials furnished for repair work when retail value is over 10% of total charge; must separate charges on invoices

* Repair work performed under optional lump-sum contract; the repairer is regarded as a consumer so labor is exempt but sale of parts and materials is taxable

TEXAS

Exempt (generally)

* Repair service for an aircraft, ship, boat, or vessel, other than sport fishing boats or other pleasure vessels

* Repair, maintenance, creation, or restoration of computer programs, including development and modification, if the program was not sold by the repairer

* Repair service on motor vehicles

* Parts or labor furnished by the manufacturer to repair tangible personal property under a warranty or recall campaign

* Services performed on tangible personal property that is exempt because of its nature or its use

* Labor to restore real or tangible personal property damaged by a declared disaster, if labor is separately stated in invoice

* Labor to restore, repair, or remodel an improvement to real property if amount of charge for labor is separately stated and performed on an improvement to real property listed in the National Register of Historic Places

* Materials used by repairpersons

* Repairs to carpets in residential real property

Nonexempt (generally)

* Extended warranty or service policies

* Tangible personal property transferred by service provider to purchaser as part of a restoration, repair, or remodeling of improvements to real property listed in the National Register of Historic Places

* Machinery and equipment used by repairpersons

FLORIDA

Exempt (generally)

* Materials provided by repairperson when incorporated into tangible personal property, including welding rods, paint, thinner, nuts, and bolts

* Maintenance contract that covers the cost of labor to repair or maintain computer hardware

* Charges for labor, parts, and materials used in repair of (and incorporated into) industrial machinery and equipment used in manufacturing, processing, compounding, production, or preparation for shipping of items of tangible personal property at a fixed location within the state (for certain industries)

* Materials and supplies used to perform a factory or manufacturer's warranty, when furnished with new equipment at no extra charge and materials and supplies are paid for by factory or manufacturer

* Tangible personal property shipped to Florida, repaired, and then shipped back to owner

Nonexempt (generally)

* Labor and materials charges to alter, remodel, maintain, adjust, or repair property (applies to entire charge when parts are furnished by repairperson)

* Items used in repair, such as tools, sandpaper, and flux

* Charges for cleaning or regulating items such as watches, jewelry, and electrical appliances

* Service warranties

* Tangible personal property sent out-of-state for repairs

* Cost of labor or services used to install personal property that does not become part of realty, even if charge is separately stated (includes installing carpet, slip covers, household appliances, stepping stones, and window air conditioning units)

NEW YORK

Exempt (generally)

* Repair, maintenance, and installation services purchased for resale or performed on tangible personal property held for resale

* Wages, salaries, and other compensation paid to employees for installation, repair, or maintenance service

* Warranty repairs or maintenance services rendered without charge

* Capital improvements contracts (however, contractors must pay tax on purchases of tangible personal property used or consumed in a capital improvement)

* Trash and debris removal services purchased by contractors who maintain, service, or repair real property

Nonexempt (generally)

* Installing, maintaining, or repairing tangible personal property, whether or not tangible personal property is transferred with such services

* Maintenance and service contracts

* Repair, maintenance, and installation charges related to real property, including interior cleaning and maintenance services

* Tangible personal property that retains its identity after installation

Source: Edited and adapted from RIA Explanations: para. 21,740: Manufacturing, Processing, and Fabricating, para. 21,560: Containers, Wrappers, Packaging, and Labels, and para. 22,140: Repair, Maintenance, and Installation Services (checkpoint.riag.com).
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Title Annotation:APPENDIX
Publication:The CPA Journal
Geographic Code:1U9CA
Date:Dec 1, 2009
Words:2998
Previous Article:State sales tax and manufacturing plant location.
Next Article:New York City conforms business taxes with New York State.
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