Production Exemption
- Businesses that qualify for the exemption
- Businesses that don't qualify for the exemption
- Purchases that qualify for the exemption
- Purchases that don't qualify for the exemption
- If you change the use of an item
- Logging, broadcasting, and publishing exemptions
- Buyer's responsibility when making exempt purchases
- Selling the goods you produce
- Seller's responsibility to document sales
- Use tax
- Laws and rules
- Print ALL
Purchases that don't qualify for the exemption
Even if you qualify for the production exemption, the following items are taxable:
Used in nonproduction activities
Equipment and supplies used in nonproduction activities are taxable.
Examples:
- Maintenance and janitorial activities
- Office and administrative activities
- Selling and distribution activities
- Transportation activities, such as:
- Moving property over roads, highways, canals, rivers, rail lines, through pipelines or slurry lines, or on aircraft
- Moving goods, including partially completed goods, from one exempt processing location to a separate location that's part of the continuous exempt processing activity
- Moving raw materials, except farm produce, from the point of origin to where the production process begins
Licensed motor vehicles and aircraft
Used to make repairs
Machinery, equipment, tools, and other property used to make repairs is taxable.
Tangible personal property
Tangible personal property that becomes part of real property is taxable.
Examples:
- Equipment used more than 50% of the time to improve real property
- Materials that become part of real property
Recreation-related vehicles
Examples:
- Snowmobiles
- Off-highway motorbikes
- Motorcycles
- All-terrain vehicles (ATV's)
- Motor homes
- Travel trailers
- Park model recreational vehicles
- Truck campers
- Camping trailers
Used to make items that you won't sell
Machinery, equipment, tools, or other property used to make items that you won't sell is taxable.
Coatings or paint
Coatings or paint used to protect and maintain equipment, including production equipment is taxable.
Safety equipment
Safety equipment and supplies that aren't used in a production area are taxable.
Examples:
- First aid kit in the office
- Fire extinguisher in the shipping area
- Jacket or gloves used in a production area to keep an employee warm, but not required by OSHA
