Tax Applied to Caustic Solution Used to Clean Manufacturing Dies in Ohio

Wednesday, September 3rd, 2014

Manufacturing machinery.

The Ohio Board of Tax Appeals ("Board") recently ruled that a taxpayer had to pay tax on a caustic solution used to clean dies.

The taxpayer purchased a caustic solution to use on dies used in manufacturing. The solution removed aluminum residual that collected in the die during a manufacturing run. If left in the die, the residual could create problems in later manufacturing runs. The taxpayer applied the solution to the dies between manufacturing runs. Sometimes, if a problem occurred during a manufacturing run, the taxpayer would stop that run to apply the solution.

Ohio exempts purchases of certain tangible personal property used during manufacturing operations. This exemption applies to items that control, physically support, produce power for, lubricate, or are otherwise necessary for production machinery to function and for the manufacturing operation to continue.

The Board ruled that the caustic solution was taxable. The solution was not necessary to continue the manufacturing operation. In fact, the taxpayer only used the solution when the dies were taken out of the manufacturing operation - when a manufacturing run had finished or had been stopped. Because the solution was only used when the manufacturing process had stopped, it was not necessary to continue the manufacturing operation.

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