Sales Tax Articles
Sales Tax State Activity Update - February 2006
New York Deep Freezes Cold Storage Production Exemption
The New York State Department of Taxation and Finance ("Department") recently determined that machinery and equipment, repair and maintenance services, building improvements, and utilities were not exempt when purchased for use in a cold storage facility owned by fruit processors.
The taxpayer is in the business of operating cold storage facilities. The taxpayer contracts with fruit processors to store their fruit at its cold storage facilities prior to actual processing. The cold storage facility retards the fruit's natural ripening process.
Its activities are separate and distinct from the fruit processor's actual production line. The taxpayer does not grow or process fruit and at no time takes actual title to the fruit. The fruit is considered part of the fruit processor's inventory while in storage at the facility.
New York statutes and regulations provide an exemption for machinery and equipment used directly and predominantly in the production of tangible personal property for sale by processing, including handling and storing of raw materials at the plant site and continuing through the last step of production where the product is finished and packaged for sale.
The Department determined that the cold storage facility activities are not processing within the meaning of the statutes. The storage does not occur at the processor's plant site and is not part of a continuous production line as required by regulation.
Therefore, the purchase of machinery and equipment and the repair and maintenance and utilities used to operate the equipment at the cold storage facility are taxable. The Department noted that building improvements that qualified as capital improvements in accordance with New York statutes would not be subject to sales tax.
View the full text on the New York State Department of Taxation and Finance Website.
( New York State Technical Services Division Advisory Opinion TSB-A-05(47), 12/28/05)
Subscribe to CyberTax News and receive the latest indirect tax news, including rate changes, rule updates, compliance issues, and more, delivered directly to your email.
Call 800.355.3500 to Speak to a Sales Representative.
