Sales Tax State Activity Update - October 2004

New York Concludes Processor of Galvanized Steel Products Entitled to Exemption

In a recent advisory opinion, the New York Department of Taxation and Finance (“Department”) indicates a processor of galvanized steel products is entitled to an exemption for machinery and equipment used directly and predominantly in the production for sale of tangible personal property by processing.

The processor treats its customers' materials (steel) by applying a galvanizing coating to the steel to create a material that is extremely resistant to rust and corrosion, unlike untreated steel. The processing is a service performed on its customers' tangible personal property rather than a direct sale of tangible personal property to its customers.

The Department concluded the processor is entitled to the exemption for machinery and equipment used more than fifty percent in the processing of material intended for resale because of the following:

• Subcontractors performing part of a production process may be entitled to the exemption.
• The processing services effected a change in the nature of the material and are within the meaning of processing.
• The processor’s customers intend to sell the finished product, galvanized steel, to customers as evidenced by resale certificates given to the processor for rendition of its services.

View the full text: http://www.tax.state.ny.us/pdf/Advisory_Opinions/Sales/A04_22s.pdf (New York Commissioner of Taxation and Finance, Advisory Opinion, TSB-A-04(22)S)

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