Indiana’s Manufacturing Exemption Requires "Direct Use" in Production

Monday, April 2nd, 2018

Skid loader on farm.

The Indiana Department of Revenue (DOR) recently ruled that a skid loader did not qualify for the state manufacturing exemption.

The taxpayer was an Indiana company that sold fertilizer and provided spreading services for farmers. The taxpayer purchased a skid loader exempt from tax under the manufacturing exemption. The taxpayer argued that the exemption applied because the equipment was used to move materials into the fertilizer blending process. The DOR did not agree that the taxpayer was in the business of fertilizer production, but addressed the claim anyway.

Indiana exempts equipment for direct use in production. The exemption applies to equipment that has an immediate impact on the article being produced. The ruling determined that skid loader was taxable because loading materials is a "pre-production activity" that does not have an immediate impact upon the production of fertilizer. The ruling also briefly discusses a claim for the resale exemption. However, the claim was denied because the equipment in question was used by the taxpayer, and was not resold.'s Manufacturing Exemption Requires "Direct Use" in Production

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