Sales Tax State Activity Update - August 2005

Virginia Offers a Clear View on Lens Manufacturing

A ruling of the Virginia Tax Commissioner provides that equipment directly used to make prescription eyewear in an ophthalmic laboratory qualifies for the manufacturing exemption.

A Virginia taxpayer operates one ophthalmic laboratory and numerous retail optical departments in the state. Equipment in the laboratory is used to grind, cut and edge lenses and apply UV, anti-glare and scratch resistant coating to the lenses, which are assembled into a set of ophthalmic frames for sale to retail optical departments throughout the country.

Virginia sales and use tax law provides an exemption for machinery, tools and other items used directly in industrial manufacturing of tangible personal property for sale or resale. The law provides that industrial processing includes those businesses classified within the specific manufacturing codes found within the SIC and its replacement, the NAICS. The Department also previously determined that a retail business operating a processing operation separate from it retail operation may qualify for the exemption as an industrial processor.

The Tax Commissioner determined that equipment used directly in the ophthalmic laboratory qualified for exemption because the laboratory activities were clearly a manufacturing activity, the taxpayer's business was properly classified manufacturing under NAICS and the laboratory was separate from the retail optical departments.

The full text can be viewed here.

(Rulings of the Virginia Tax Commissioner No. 05-116)

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