X Company is in the business of manufacturing and selling specialized ground support vehicles for use in the aircraft industry. The ground support vehicles are used to provide 400 cycle electricity to the aircraft prior to its departure and often landing. In some cases the fuel tank is relocated and a modified hydraulic system is added.
Taxpayer collects sales tax on the finished product.
The court analyzed the question in the context of whether a different product resulted from the process or whether the product remained basically the same with some modification. The court found that many different operations were performed on the truck chassis before the process was completed, including cutting into the frame of the vehicle. The truck chassis was only a bare skeleton of what was to be the final product. X Company must satisfy the exemption by proving that the truck was a production material that became a component part of property to be sold. Among other things manufacturing requires that there be a transformation of property into a different product having a distinctive name, nature and use.