Sales Tax State Activity Update - July 2005

Virginia Enforces Manufacturing Exemption

The Virginia Tax Commissioner recently ruled that equipment used at a storage facility to move finished apparel into finished goods inventory did not qualify for the manufacturing exemption.

A Virginia taxpayer imports finished apparel from manufacturers outside the United States to a storage facility. The finished apparel is taken via truck from port of entry to the storage facility where it is placed into finished goods inventory. The finished goods inventory is used to fill orders from retail outlets.

Virginia sales and use tax law provides that distribution is the transport or conveyance of products after the completion of production and is not part of manufacturing or processing. Since the products at the storage facility are completed for sale when received and no further manufacturing or processing takes place at the facility, the equipment used at the facility does not qualify for the manufacturing exemption.

The full text can be accessed here.

Virginia Tax Commissioner Ruling No. 05-95 07/05

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