Sales Tax Articles
Sales Tax State Activity Update - October 2007
Washington Creates a Sticky Situation for Tar Pitch Refiner
Machinery and equipment utilized in pitch melting did not qualify for sales and use tax exemption.
Taxpayer imports and sells coal tar pitch in flake, rod, prill, and liquefied form to customers. In addition the Taxpayer has a melting plant located in Washington.
Taxpayer converts the solid pitch to liquid by placing it into a large container-type melter and applying heat to the pitch. Taxpayer must heat the pitch to 400 degrees Fahrenheit for the pitch to melt.
Taxpayer maintains that the reason they liquefy the pitch is to make it compatible with its customer's manufacturing process.
Findings: Taxpayer's process of melting sold pitch into liquid pitch does not result in a significant change when the pre-processed materials are compared to the final liquefied product sold to its customers.
While melting pitch does temporarily change the chemical and functional nature of the product, the melting process did not result in a significant or permanent change to the product and thus did not constitute a manufacturing activity.
The full text can be viewed on the Washington Department of Revenue Website.
(Washington Department of Revenue Appeals Division, Determination 07-0082 (2007) 26 WTD 231.)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.
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