Purchases That Qualify for the Lumber Manufacturing Exemption

Purchase Requirements

An item qualifies for the exemption, if it meets all of the following requirements:

  • Primarily used in the lumber manufacturing process. (See Idaho Code section 63-3607A.)
  • Necessary or essential – you can’t manufacture lumber without it
  • Directly used in or consumed during lumber manufacturing – after the beginning and before the end of the process:
    • The lumber manufacturing process begins when you first handle logs at the processing plant or site
    • The process ends when the lumber is at the later point of
      – When you place it in storage, even temporarily, to be prepared for shipment or
      – When it’s ready to be sold in its final form
  • Tangible personal property – must not become real property
  • Allowable by law – must not be specifically excluded from the lumber manufacturing or production exemption by law or rule

Exempt Purchases — Lumber Manufacturing

The production exemption lists items that are exempt from tax. Qualifying lumber manufacturers can also buy the following items exempt:

Equipment used primarily to manufacture lumber

Examples:

  • Log loaders, log decks
  • Log pond items, including: Log loading equipment, boats moving logs from the storage area to the debarker
  • Chippers, saws, edgers, trimmers, planers, debarkers
  • Mill decks for grading and cutting lumber to length
  • Sprinkler equipment to prevent product deterioration
  • Dry kilns – including fire brick inside the kiln
  • Conveyor belts and equipment to move logs or lumber through the production process
  • Equipment to collect waste products used as “hog fuel” for the boiler
  • Boilers that produce steam to operate production equipment

Note: Items that become part of real property aren’t exempt

Generators

That produce electricity to power production equipment

Product packaging shipped to the customer

Examples:

  • Items that form a container for the lumber (e.g., lumber wrap, steel banding)

Pollution control equipment and materials

If they:

  • Are required* to meet air and water quality standards
  • Become part of the pollution control equipment, and
  • Are used to operate the pollution control equipment.

* The standards must be set by a state or federal agency that has authority to set them.

Examples of pollution control equipment that aren’t exempt:

  • Chemicals or other supplies that don’t become part of the equipment
  • A smoke stack, building, or other structure that merely houses the equipment