S.C. Code Regs. 117-302.5 — Machines

(A) Introduction:
Machines used in manufacturing, processing, compounding, mining, or quarrying tangible personal
property for sale, and the replacement parts and attachments to such machines, are exempt from the
sales and use tax under Code Section 12-36-2120(17). Materials or equipment which might constitute
a machine or machinery when not used for manufacturing, processing, compounding, mining, or
quarrying tangible personal property for sale are not exempted.
(B) General Guidance:
(1) A ''machine used in manufacturing … tangible personal property for sale'' is exempt from the
sales and use tax. For purposes of this regulation subsection (117-302.5), manufacturing includes
processing, compounding, mining and quarrying.
A machine qualifies for the exemption under Code Section 12-36-2120(17) if the machine is
integral and necessary to the manufacturing process and the product being manufactured is being
manufactured ''for sale.'' A machine, which includes every mechanical device or combination of
mechanical powers, parts, attachments and devices to perform some function and produce a certain
effect or result, is integral and necessary to the manufacturing process if it meets all of the following:
(a) The machine is used at a manufacturing facility. This exemption only applies to machines
used at a facility whose purpose is that of manufacturing a product ''for sale.'' It does not apply to
machines used at a facility whose purpose is retailing, wholesaling, distributing, or some other
non-manufacturing purposes. For example, machines used by a large industrial baker in
manufacturing breads, cakes, and pies for sale may be purchased tax free; however, similar
machines used by a ''Ma & Pa'' bakery on Main Street may not be purchased tax free since they
are used at a facility whose purpose is retailing.
(b) The machine is used in, and serves as an essential and indispensable component part of the
manufacturing process, and is used on an ongoing and continuous basis during the manufacturing
process. A machine is not a part of the manufacturing process merely because it is integral and
necessary to the manufacturer. For example, machines used for warehouse, distribution, or
administrative purposes are integral and necessary to the manufacturer, but not part of the
manufacturing process.
(c) The machine must be substantially ''used in manufacturing … tangible personal property for
sale.'' The statute does not require that the machine be used exclusively in manufacturing;
however, incidental manufacturing use will not qualify for the exemption. For purposes of the
exemption, more than one-third of a machine's use in manufacturing is substantial.
Machines that meet the above requirements do not lose the exemption because they do not have
moving parts or because they are fixtures upon the real estate where they stand. However,
buildings and parts of buildings, as well as other improvements which benefit the land generally
and may serve other users of the land, do not come within the exemption.
(2) Machine Parts:
Parts of machines, attachments, and replacements used, or manufactured for use, on or in the
operation of machines are also exempt, provided the parts, attachments or replacements are used on
or in the operation of such machines, manufactured for use on or in the operation of such machines,
integral and necessary to the operation of such machines, and must be customarily so used. These
restrictions are interpreted to mean that the part or attachment must be purchased in the form in
which it will be used by the manufacturer without any fabrication or alteration by him, except the
usual and customary minor adjustment, (except as stated in ''Building of Machines'') and that it is a
standard part or attachment customarily used and, further, that the machine or machinery on which
it is used would not do the work for which it was designed if it were not used. This, of course,
exempts all parts and attachments without which the machine would do no work, and, in addition, it
exempts parts and attachments designed to increase the efficiency of the machine.
(3) Building of Machines:
Manufacturers, and contractors building machines for manufacturers are entitled to purchase at
wholesale, free of the sales or use tax, materials used by them in the building of machines for the
purpose of manufacturing tangible personal property for sale. It should be noted that only those
materials are exempt to manufacturers or their contractors, which are used by them in building
machines for the purpose of manufacturing tangible personal property for sale. This ruling would
not be applicable to tangible personal property for use as building materials from which there is
erected a ''building.'' (See section on ''Buildings'' below.)
(4) Conveyances:
(a) The general rule with reference to material handling machinery and/or mechanical convey-
ors is that such machinery is subject to the tax up to the point where the materials go into process.
The machine feeding the first processing machine(s) is exempt. The last machine to come within
the exemption is that machine which discharges the finished product from the last machine used
in the process. Material handling machinery used for transporting (in process) material from one
process stage to another comes within the exemption. Warehouse machinery used only for
warehouse purposes, loading and unloading, storing, transporting raw materials and finished
products, etc., is subject to the tax, unless exempt under the provisions of Code Section
12-36-2120(51). If material handling machinery is customarily used for a dual purpose, that is
partly for an exempt purpose and partly for a taxable purpose, and is not otherwise exempt under
the provisions of Code Section 12-36-2120(51), the machinery may be purchased free of the tax
under the machine exemption (Code Section 12-36-2120(17)) provided the exempt use represents
a substantial portion of its use.
For example, the following conveyances are exempt:
(i) Wheeled conveyances known as ''print screen truck'' used by a textile manufacturer in the
movement of print screens from a holding area to the exempt print machines, to the print
screen washing machine, and back to the holding area racks after the style or pattern is changed
and the print screen is washed.
(ii) Warehouse machines (e.g., forklifts) that are used substantially to feed raw material into or
onto the first processing machine in the manufacturing process area in addition to being used in
loading, unloading, storing, and transporting raw materials from the warehouse to the manufac-
turing area, or transporting finished products from the manufacturing area to the warehouse.
(b) Conveyances are subject to the tax up to the point where the materials go into the process.
The last machine to come within the exemption is that machine which discharges the finished
product from the last machine used in the process. Under this rule, the following conveyors are
subject to the tax:
(i) Conveyors used solely by the taxpayer in the warehousing of raw materials and finished
goods.
(ii) Conveyors which are not integral and necessary to the manufacturing process.
(iii) Piping leading to and from storage tanks.
(iv) Piping, pumps, and well connections installed for use by a manufacturer to supply the
manufacturing plant with water necessary for the manufacture of tangible personal property.
(v) Warehouse machines that are used for warehouse purposes, such as loading, unloading,
storing, transporting raw materials from the warehouse to the manufacturing area, or transport-
ing finished products from the manufacturing area to the warehouse.
(5) Chemicals:
(a) Chemicals, including greases, oils, lubricants, and coolants, used in an exempt manufactur-
ing machine that are essential to the functioning of the exempt machine during the manufacturing
process are integral, necessary, and indispensable to the manufacturing process and are exempt as
part of the machine. For example, the following are situations in which chemicals, greases, oils,
lubricants, and coolants are exempt as part of an exempt machine:
(i) Chemicals, greases, oils (motor oils, gear oils, chain oils), lubricants, and coolants used in
an exempt manufacturing machine when such items are integral and necessary to the manufac-
turing process, such as those that are essential in ensuring the functioning of the machine
during the manufacturing process, and the use of such items is an ongoing, continuous activity.
(ii) Chemicals used in an exempt pollution control machine to abate or prevent pollution
when such chemicals are integral and necessary to the manufacturing process, such as the
treating of wastewater or otherwise preventing or abating pollution, and the use of such
chemicals is an ongoing, continuous activity.
(iii) Chemicals used to clean the exterior or interior of an exempt manufacturing machine
when the cleaning is integral and necessary to the manufacturing process, such as those that are
essential in ensuring the quality of the product is maintained, and the use of such chemicals is
an ongoing, continuous activity.
(iv) Chemicals used to prevent corrosion in an exempt manufacturing machine, such as an
exempt boiler, when such chemicals are integral and necessary to the manufacturing process,
such as those that are essential in ensuring the functioning of the machine during the
manufacturing process, and the use of such chemicals is an ongoing, continuous activity.
(b) Situations in which the chemicals would not qualify as a part under the machine exemption
and would therefore be subject to the sales and use tax, include:
(i) Chemicals used to clean non-exempt machines, such as storage tanks.
(ii) Chemicals used to clean floors, walls, and other parts of the manufacturing facility.
(iii) Paint used on exempt manufacturing machines to prevent corrosion of the machines is
not exempt from the tax as a machine used in manufacturing tangible personal property for
sale. (Note: This is different from the chemicals used to prevent corrosion in exempt machines,
such as exempt boilers, since the painting of the machine is not an ongoing, continuous activity.
It is a maintenance activity. The chemicals, unlike the paint, are integral and necessary to the
operation of the machines since they are essential in ensuring the functioning of the machine
during the manufacturing process and are used on an ongoing, continuous basis.)
(iv) Chemicals, greases, oils (motor oils, gear oils, chain oils), lubricants, and coolants used in
an exempt manufacturing machine when such items are not integral and necessary to the
manufacturing process, such as those that are not essential in ensuring the functioning of the
machine during the manufacturing process. For example, grease used on a part that has been
removed from an exempt manufacturing machine when such grease has been placed on the
part to protect it while it is in storage and not being used is subject to the tax since the grease is
not integral and necessary to the functioning of the part or the machine during the manufactur-
ing process.
(6) Maintenance:
Maintenance machines used at a manufacturing facility are not exempt from the tax as a machine
used in manufacturing tangible personal property for sale.
Machines that are used to maintain non-exempt machines (machines that are not integral and
necessary to the manufacturing process), or are not used on an ongoing, continuous basis to
maintain exempt manufacturing machines (machines that are integral and necessary to the manufac-
turing process) are maintenance machines and are not exempt from the tax as machines used in
manufacturing tangible personal property for sale.
The following machines are maintenance machines and therefore subject to the sales and use tax:
(a) Pressure washing machines and ultrasonic cleaning machines used to clean non-exempt
machines or parts, such as storage tanks.
(b) Machines used to clean floors and other parts of realty (e.g., machines used in removing
sawdust from the floor of a sawmill).
(c) Machines, such as maintenance machines, which are not integral and necessary to the
manufacturing process.
(d) Machines, such as pressure washing machines and ultrasonic cleaning machines, used to
clean exempt manufacturing machines or parts when the cleaning of the exempt manufacturing
machine or part is not integral and necessary to the manufacturing process, such as those that are
not essential in ensuring the functioning of the exempt machine or part during the manufacturing
process or those that are not essential in ensuring the quality of the product is maintained. In
addition, if the cleaning is not an ongoing, continuous activity, then the machines are not integral
and necessary to the manufacturing process.
(7) Storage:
Machines used at a manufacturing facility for storage are not exempt from the tax as a machine
used in manufacturing tangible personal property for sale. For example, the following machines are
for storage and therefore taxable:
(a) Racks used to store raw materials or finished goods.
(b) Storage tanks used to store raw materials, gasses, or water.
(c) Racks and tanks used to store a finished product while it cures.
Note: See example of exempt warehouse machines in Section (B)(4)(a)(ii).
(8) Buildings:
A building which houses a manufacturing process, and the various parts of such a building, are
not exempt from the tax as a machine, or a part or attachment to a machine, used in manufacturing
tangible personal property for sale. For example, the following parts of a building are not exempt:
(a) Paint or sealant used to seal the floor or walls of the manufacturing area of a building to
provide chemical resistance in the event of a spill.
(b) Paint used on the floor of the textile manufacturing area of a building to facilitate the
threading of machines so that employees can more easily see the thread.
(c) Paint used on exempt manufacturing machines to prevent corrosion of the machines.
Note: Paint is not integral and necessary to the operation of the manufacturing machines. This
is different from the chemicals used to prevent corrosion in exempt machines, such as exempt
boilers. Such chemicals, unlike the paint, are exempt when such chemicals are integral and
necessary to the functioning of the exempt machine during the manufacturing process and the use
of these chemicals to prevent corrosion is an ongoing, continuous activity. Paint is not integral
and necessary to the functioning of the machine ''during the manufacturing process'' and painting
the machine is not an ongoing continuous activity.
(d) Foundations (consisting of pilings, pile caps, elevated slab, and slab on grade) of a building
in which exempt manufacturing machines are the plant manufacturing process or system as a
whole.
(e) Structural steel, steel decking, and checker plate of a building in which exempt manufactur-
ing machines are housed.
(f) Hangers and supports used in a manufacturing building to route exempt process piping
from one area of the manufacturing process to another area of the manufacturing process via pipe
racks and cable trays.
(g) Architectural roofing and siding enclosing a manufacturing building housing exempt
manufacturing machines.
(h) Pipe, valves, fittings, etc., regardless of size, which are purchased by paper manufacturers
specifically for use in drinking water lines, fire protection lines, or for transmission of water from
source to water treatment plant, or from water treatment plant itself.
(i) Piping furnished and installed along with pump houses and well connections by a contractor
when intended for use by a paper manufacturer to supply his plant with the water necessary to the
manufacturer of paper.
(j) Power lines bringing electricity into the plant.
(k) All wires, fixtures, etc., used in lighting.
(9) Administrative Machines, Furniture, Equipment and Supplies:
Administrative machines, furniture, equipment, and supplies, such as office computers used for
word processing, recordkeeping, employee payroll, customer billing, purchasing, accounting, and
similar purposes, office furniture, office supplies, such as pens, pencils, paper, and similar items,
educational material, or items used for the personal comfort, convenience, or use of employees, are
not machines used in the process of manufacturing tangible personal property for sale and are not
exempt from the tax.
(10) Protective Clothing
Protective clothing worn by an employee working in the area in which the manufacturing process
occurs does not qualify as a machine and is not exempt from the tax as a machine used in
manufacturing tangible personal property for sale under Section 12-36-2120(17). However,
''clothing and other attire required for working in a Class 100 or better as defined in Federal
Standard 209E clean room environment'' is exempt under the provisions of Section 12-36-2120(54).
(C) Other Examples of Exempt Manufacturing Machines and Machine Parts:
The following are additional examples of machines or machines parts exempt from the tax, provided
they are (1) used at a manufacturing facility, (2) used in, and serve an essential and indispensable
component part of the manufacturing process, and are used on an ongoing and continuous basis
during the manufacturing process, and (3) used substantially in manufacturing tangible personal
property for sale:
(1) Buffing machines used to buff the cot of an exempt textile spinning machine to maintain the
yarn quality at a consistent level.
(2) Traveling water screens used to filter water from a river, lake, or other water source at a water
treatment plant processing water for sale.
(3) Quality control machines used in a lab at a manufacturing facility to test sample products being
manufactured for sale.
(4) Pressure washing machines and ultrasonic cleaning machines, used to clean exempt manufac-
turing machines or parts, when the cleaning of the exempt manufacturing machine or part is to
ensure the functioning of the exempt machine or part during the manufacturing process or to
ensure the quality of the product is maintained.
(5) Machines or machine parts used in removing sawdust from saws in a sawmill that are either
attached to the sawing mechanism or are essential in ensuring the quality of the product is
maintained.
(6) Trucks too large to be lawfully used upon the highways of this state, when used in quarry pits
for transporting rock or granite from the blasting site to the crushing machine.
(7) Sand handling and sand condition machines used by manufacturers for conditioning and
transporting, while in process, and for use in mold making.
(8) Tanks which are a part of the chain of processing operations.
(9) Patterns which become parts or attachments for molding machines when purchased by a
manufacturer for his use.
(10) Machines used in making molds from sand for use in manufacturing tangible personal
property for sale.
(11) Machines used in measuring, or weighing, and packaging by manufacturers to put the
product in condition for sale on the open market for the purpose for which it was produced.
(12) Transformers, capacitors and voltage regulators used in manufacturing and processing
tangible personal property for sale, used by producers or distributors of electricity which process the
electricity, and all transformers used by other manufacturers as a part of their manufacturing
machinery.
(13) Machines used by cotton ginners in their processing operations.
(14) Pasteurizing machines, cooling machines, mechanical separators, homogenizing machines and
bottling machines used by dairies in processing milk for sale. The machine exemption does not
extend to cover milking machines.
(15) Boiler tubes used in repairing boilers used to furnish heat or power used in manufacturing
tangible personal property for sale.
(16) Machines used by persons in the business of producing scrap iron and other metals from
junk for resale to steel mills and/or foundries, such as hydraulic baling presses (to compress sheet
steel into bales), cranes (to feed scrap metals to baling press), and alligator shears (to cut scrap steel
to predetermined sizes).
(17) Machines used by dental laboratories in manufacturing for sale plates, bridgework, artificial
teeth and other prosthetic devices.
(18) Machines used in processing and manufacturing by electric power companies including all
producing stationary machines in an electric power generating house, stationary, processing ma-
chines located in substation houses and transformers, pole or otherwise.
(19) Starters, switches, circuit breakers and other electrical equipment which are parts of, or
attachments of machines, come within the machine exemption. In order to be exempt this
equipment must be either attached directly to the machine or be immediately adjacent thereto.
Switchboards and control boards and cabinets controlling the general electrical supply system are not
considered to be parts or attachments of machines used in manufacturing. (Note, however, that,
switchboards, automatic or manually operated, which serve to operate exempt machinery may be
classified a part or attachment thereto, provided, same are attached thereto or located within the
same structure or compound.) The general rule is that power distribution machinery for operating
machines used in manufacturing tangible personal property which starts at the main switch within
the factory building or compound is exempt.
(20) Machines used in the wood preserving process by persons engaged in the business of treating
lumber or lumber products (wood preserving) which they own and treat for sale.
(21) Gas pressure regulators located in the lead off from the gas main.
(22) Machines used in the meatpacking process by meatpackers whose activities include the curing
of meats and the production of animal by-products such as lard, sausages, or tankage.
(23) Machines used by ice manufacturers in manufacturing ice for sale.
(24) Machines used to condition air (including humidification systems) for quality control during
the manufacturing process of tangible personal property made from natural fibers and synthetic
materials. This exemption applies to the pipes and duct used to distribute the processed air to the
production areas within the plant.
(25) Recording instruments attached to manufacturing machines.
(26) Machines used by a manufacturer in the tire recapping process.
(27) Machines used by municipalities in processing or compounding water for sale.
(28) Belting purchased for use on a particular machine used in manufacturing tangible personal
property for sale even though such belting may not be purchased to the exact length required.
(29) Machines purchased by persons in the business of collecting old and used paper (waste
paper) for the purpose of grading, sorting and packaging the same for sale or resale to paper mills.
(30) Insulation for pipe coverings, tank coverings, and boiler insulation purchased by a paper
manufacturer from the vendor in its final prefabricated form for a specific insulation job, provided it
does not have to be cut and fitted at the paper mill. Certain fabrication is permissible around valve
openings, pipe openings at pipe joints, etc. Note, where insulation is purchased in blocks, such
blocks are to be considered as taxable, except as noted above with respect to the purchase of material
in building a machine used in manufacturing tangible personal property for sale.
(31) Electrical equipment used as direct controls of machinery used in manufacturing is consid-
ered as part of manufacturing machinery.
(32) Machines used for the generation of electricity, such as boilers, engines, condensers, genera-
tors, and transformers and their attachments.