Lumber Manufacturing: Production Exemption
Purchases that qualify for the exemption
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
