18-125 C.M.R. ch. 303 — Rule 303. Sales to Industrial Users

MAINE REVENUE SERVICES
SALES, FUEL AND SPECIAL TAX DIVISION
RULE NO. 303
SALES TO INDUSTRIAL USERS
SUMMARY: Explains the Sales and Use Tax Law as it pertains to the exemption
provisions of machinery and equipment used in production, and consumed or
destroyed items.
SECTION 1. Definitions
1. Production. "Production" as used in Sec. 1752(9-B) commences with the
movement of raw materials to the first production machine after their receipt and storage
at the production site (after receipt if the raw materials are not stored) and ends with the
completion of the finished product. Production includes any "in-line" packaging
operation. The acquisition of raw materials, the transportation of raw materials or goods
in process between production sites, and administrative and distributive operations do not
constitute production.
2. Foundations. "Foundations" as used in §1752(7-B), includes permanent
supports, such as those composed of concrete. Metal supports that can be dismantled and
moved are considered part of the machinery or equipment they support and are therefore
exempt if the machinery or equipment itself is exempt.
3. Directly. "Directly" as used in §1752(2-A) excludes support operations, such
as machine shops in which production equipment is maintained. Testing for quality
control is directly in production only insofar as those testing devices are physically
incorporated in machinery or equipment that is otherwise exempt.
SECTION 2. Consumed or Destroyed Items
1. Exempt items. Tangible personal property that has a normal physical life
expectancy of less than one year is exempt if it falls within one of the following
categories:
A. Items that are integrated with and essential to the operation of exempt
production machinery and equipment. Items under this category will normally
include but not be limited to such items as abrasives, coolants, lubricants, filtering
materials, etc.
B. Items that come in contact with, or are added to, the raw product during
production, but that are later extracted or dissipated and do not become a
component part of the tangible personal property produced. Items under this
category will normally include but not be limited to such items as catalysts,
chemicals, solvents, liquids, etc.
C. Items that come into contact with the products produced and that are an
integral and essential part of production. Items under this category will normally
include but not be limited to abrasives, polishing agents, stencil materials, tagging
materials, etc.
2. Taxable items. Tangible personal property that is consumed and destroyed is
taxable if it falls within one of the following categories:
A. Items consumed or destroyed prior to the commencement of the production
process or after production has ended as provided in §1752(9-B) of the law and
Section 1(1) of this rule.
B. Items consumed or destroyed in the course of contact with machinery and
equipment that is not "directly" in production as provided in §1752(2-A) of the
law and Section 1(3) of this rule.
Items under this category will normally include but not be limited to the
following:
(1) Cleaning supplies, including floor sweeping compounds, soaps, etc.,
regardless of where used;
(2) Steam used to heat buildings, including the production area;
(3) Personal apparel used by employees, including aprons, gloves, hair
nets, ear plugs, face shields or masks, etc.;
(4) Light bulbs, flash lights and batteries, used for lighting;
(5) Chemicals or supplies of any kind used in quality control and research
laboratories; and
(6) Supplies used in maintenance of production machinery and equipment,
including abrasives, files, grinding oil, etc.
SECTION 3. Certification requirement.
Where the sale of tangible personal property is claimed to be non-taxable, the
purchaser must provide the seller with a certificate in the form prescribed by the State
Tax Assessor; and on the furnishing of such certificate the purchaser shall be held solely
accountable for the payment to the State of any taxes, together with penalties and interest
thereon, that may later be determined to be due on such purchases in accordance with the
applicable provision of the law or this rule.
The certificate is considered a part of each order for the tangible personal property
unless the purchaser advises the seller to the contrary at the time the order is placed, and
remains in effect until revoked by the purchaser in writing.
AUTHORITY: 36 MRSA §112
EFFECTIVE DATE: June 1, 1951
AMENDED: November 12, 1989
AMENDED: January 29, 2007