Oil and Grease Not Part of Exempt Machinery in Arizona

Thursday, July 17th, 2014

 
 
A closeup of oil poured onto a machine.
Share
Link
Arizona
General

The Arizona Tax Court recently released a ruling that oil and grease were not component parts of exempt manufacturing machinery.

At issue were purchases of oil and grease used to lubricate machinery used in mining and metallurgical operations. Without these lubricants, the machinery would be subject to frequent and catastrophic failures.

Arizona exempts sales of machinery and equipment used directly in mining and metallurgical operations. This exemption extends to component parts for the machinery or equipment. It does not extend to expendable materials. To determine whether an item is a component part or an expendable material, courts look at the nature of the item and its role in the mining or metallurgical operations. Items that are essential or necessary to completing the finished product are more likely to be exempt component parts.

The court concluded that oil and grease were expendable materials, not component parts. The primary function of the oil and grease was to lubricate the machinery. They were substances applied to a whole machine; they were not component parts of the machine. The substances did not touch, affect, or add value to raw materials or the work in progress. They therefore did not directly contribute to the mining or metallurgical process. Although the lubricants were necessary to prevent the machinery's failure, they were not necessary to the actual production process. The oil and grease were therefore taxable.

http://www.superiorcourt.maricopa.gov/SuperiorCourt/TaxCourt/docs/TX2011_001038.pdf


About TTR

Transaction (buying or selling things), Tax (the tax on this activity), Resources (our people, our website, our support services) - TTR, Inc.

TTR has a website that companies subscribe to and use daily. This website provides a list of everything that can be bought or sold in the U.S. It provides simple answers to whether buying or selling these items is taxable (subject to a sales tax or other tax), and it provides all the legal authority to support these tax answers.

TTR likes to keep things simple and fun, which is why it has great people who provide help to clients on any support questions they have about transaction tax issues.

Please visit TTR on the web at www.ttrus.com or call 866.578.8193.

Texas Releases Detailed Guidance on Exempt Organizations

Thursday, October 18th, 2018 -The Texas Comptroller has released a publication that provides detailed information on how sales and use tax a...

Telephone Answering Services Taxable in Arkansas

Tuesday, October 16th, 2018 -The Arkansas Department of Finance and Administration recently ruled that the service of answering calls on be...

Washington Provides Guidance on Lodging Tax for Online...

Friday, October 12th, 2018 -The Washington Department of Revenue released updated guidance that provides tax reporting information for bed...

Economic Nexus in West Virginia

Wednesday, October 10th, 2018 -The West Virginia State Tax Department announced that it will require remote sellers to begin collecting sales...

Idaho Provides Guidance on the Exemption for Medical...

Monday, October 8th, 2018 -The Idaho State Tax Commission recently released guidance that explains Idaho's sales and use tax laws for buy...

Arkansas Does Not Follow Federal Law on Foreign Income

Friday, October 5th, 2018 -The Arkansas Department of Taxation and Finance recently released an opinion that says the state does not conf...