Magnetically Cleaning Corn is Exempt in Ohio

May 22nd, 2019

The Ohio Board of Tax Appeals recently ruled that a magnet used to clean or remove scrap metal from corn before it was converted into a different form was exempt from use tax as part of the manufacturing process.

The taxpayer was a company that operated biorefineries that manufactured ethanol and other corn-based products. In order to get the corn ready for manufacturing, the taxpayer funneled its corn to a conveyer and passed it under a strong magnet before sending it through the remainder of the manufacturing process. The magnet removed any metal contaminants, ranging from small metal filings to wrenches.

Ohio exempts purchases of items that are "transferred primarily in a manufacturing operation to produce tangible personal property for sale." To determine when the manufacturing process began, the court had to examine (1) when the corn was changed, converted, or transformed into a different state or form from which it previously existed, and (2) when the corn was committed to the manufacturing process. The court found that the use of the magnet was the beginning of the manufacturing process because (1) the magnet refined the corn when it removed the metal debris, and (2) how close in time the corn was sent under the magnet to the remainder of the manufacturing process.