Sales Tax Articles
Sales Tax State Activity Update - May 2008
Georgia Battles History on Manufacturing Exemption
In a court case regarding the taxability of repair parts used in a manufacturing environment, the GA Supreme Court confirmed, yet again, the general standard for reviewing taxation statutes relies on the fact that "Taxation is the rule, and exemption from taxation [is] the exception".
Historically, the interpretation of the GA statutes concluded that the machinery repair parts at issue were not used to upgrade the machinery in a manufacturing plant. Accordingly, the manufacturing exemption did not apply to repair parts. Over the years, legislation changed the wording of OCGA ยง 48-8-3 (34) (A) to clarify the meaning of the exemption. However, it was not until the year 2000 that the language became more specific. A phased-in exemption became applicable to machinery repair parts that can only be applied on a prospective basis.
While the majority opinion did not allow for a retroactive application of the updated statute, the dissenting opinion included some compelling arguments regarding statutory construction and the interpretation of legislative intent. Reaching a different conclusion may have turned on another understanding of the ordinary and everyday meaning of the word "Components".
It is too early to tell if Owens Corning will take the next step of appeal to the U S Supreme Court. The case did not provide any indication of the monetary value of their refund request.
The full opinion can be accessed on the Supreme Court of Georgia's Website. (PDF)
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