Finally, a conclusion is reached. The ink on the inkpads is transferred via a hand stamp to a tag on the hospital gown. The inked tag is used to identify the size of the hospital gown. According to A.R.S. 42-5061, Retail classification , the transaction privilege tax is imposed on the business of selling tangible personal property at retail. The tax base for the retail classification is the gross proceeds of sales or gross income derived from the business.
All retail sales are subject to tax unless specifically exempted by statute.
A. Sales of articles to be incorporated into a fabricated or manufactured product are considered to be sales for resale and, therefore, exempt. For example, the sale of wood to a furniture manufacturer is a sale for resale. In order for the exemption to apply, the materials must actually become a part of the finished product. Supplies which are consumed in the manufacturing process do not qualify. The sale of tools, supplies, and other articles to be used or consumed by persons in the operation of their businesses, and not for resale, are taxable as retail sales.