Compilation of Rules and Regulations of the State of Georgia › Department 560 - RULES OF DEPARTMENT OF REVENUE › Chapter 560-12 - SALES AND USE TAX DIVISION › Subject 560-12-2 - SUBSTANTIVE RULES AND REGULATIONS › Rule 560-12-2-.62 - Manufacturing Machinery and Equipment, Industrial Materials, and Packaging Supplies

Current through Rules and Regulations filed through June 27, 2024
(1)
				Purpose. This Rule explains the sales and use tax exemptions in O.C.G.A §
									48-8-3.2 for machinery and equipment necessary and integral to the manufacture of
				tangible personal property in a manufacturing plant, for repair and replacement
				parts associated with such machinery and equipment, and for industrial
				materials and packaging supplies.
(2) Definitions. For purposes of this Rule,
				the following definitions and explanations apply:
(a) "Consumable supplies" means tangible
				personal property, other than machinery, industrial materials, packaging
				supplies, and energy, that is consumed or expended during the manufacture of
				tangible personal property. The term includes but is not limited to water
				treatment chemicals for use in, on, or in conjunction with machinery or
				equipment and items that are readily disposable.
(b) "Energy" means natural or artificial gas,
				oil, gasoline, electricity, solid fuel, wood, waste, ice, steam, water, and
				other materials necessary and integral for heat, light, power, refrigeration,
				climate control, processing, or any other use in any phase of the manufacture
				of tangible personal property. The term excludes energy purchased by a
				manufacturer that is primarily engaged in producing electricity for
				resale.
(c) "Equipment" means
				tangible personal property, other than machinery, industrial materials, and
				energy. The term "equipment" includes durable devices and apparatuses that are
				generally designed for long-term continuous or repetitive use. The term also
				includes consumable supplies. Examples of equipment include but are not limited
				to machinery clothing, cones, cores, pallets, hand tools, tooling, molds, dies,
				waxes, jigs, patterns, conveyors, safety devices, and pollution control
				devices. The term includes components and repair or replacement parts. The term
				"equipment" excludes real property.
(d) "Fixtures" means tangible personal
				property that has been installed or attached to land or to any building thereon
				and that is intended to remain permanently in its place. A consideration for
				whether tangible property is a fixture is whether its removal would cause
				significant damage to such property or to the real property to which it is
				attached. Fixtures are classified as real property. Examples of fixtures
				include but are not limited to plumbing, lighting fixtures, slabs, and
				foundations.
(e) "Industrial
				materials" means materials that are purchased for future processing,
				manufacture, or conversion into articles of tangible personal property for
				resale when the industrial materials become a component part of the finished
				product. The term also means materials that are coated upon or impregnated into
				the product at any stage of its processing, manufacture, or conversion, even
				though such materials do not remain a component part of the finished product
				for sale. The term "industrial materials" includes raw materials.
(f) "Local sales and use tax" means any sales
				or use tax that is levied and imposed in an area consisting of less than the
				entire state.
(g) "Machinery" means
				an assemblage of parts that transmits force, motion, and energy one to the
				other in a predetermined manner to accomplish a specific objective. The term
				"machinery" includes a machine and all of its components, including but not
				limited to belts, pulleys, shafts, gauges, gaskets, valves, hoses, pipes,
				wires, blades, bearings, operational structures attached to the machine
				including stairways and catwalks, and other devices that are required to
				regulate or control the machine, allow access to the machine, or to enhance or
				alter its productivity or functionality. The term "machinery" includes repair
				or replacement parts. The term excludes real property, energy, and consumable
				supplies.
(h) "Machinery clothing"
				means felts, screen plates, wires or any other items used to carry, form, or
				dry work in process through the manufacture of tangible personal
				property.
(i) "Manufacture of
				tangible personal property," used synonymously with the term "manufacturing,"
				means a manufacturing operation, series of continuous manufacturing operations,
				or series of integrated manufacturing operations, engaged in at a manufacturing
				plant or among manufacturing plants to change, process, transform, or convert
				industrial materials by physical or chemical means, into articles of tangible
				personal property for sale, for promotional use, or further manufacturing that
				have a different form, configuration, utility, composition, or character. The
				term includes but is not limited to the storage, preparation, or treatment of
				industrial materials; assembly of finished units of tangible personal property
				to form a new unit or units of tangible personal property; movement of
				industrial materials and work in process from one manufacturing operation to
				another; temporary storage between two points in a continuous manufacturing
				operation; random and sample testing that occurs at a manufacturing plant; and
				a packaging operation that occurs at a manufacturing plant.
(j) "Manufacturer" means a person or
				business, or a location of a person or business that is engaged in the
				manufacture of tangible personal property for sale, promotional use, or further
				manufacturing.
1. To be considered a
				manufacturer, the person or business, or the location of a person or business,
				must be:
(i) Classified as a manufacturer
				under the 2007 North American Industrial Classification System Sectors 21, 31,
				32, or 33; or North American Industrial Classification Systems industry code
				22111 or specific code 511110; or
(ii) Generally regarded as a
				manufacturer.
2.
				Businesses that are primarily engaged in providing personal or professional
				services, or in the operation of retail outlets, generally including but not
				limited to grocery stores, pharmacies, bakeries, or restaurants, are not
				considered manufacturers.
(k) "Manufacturing plant" means any facility,
				site, or other area where a manufacturer engages in the manufacture of tangible
				personal property.
(l) "Packaging
				operation" means bagging, boxing, crating, canning, containerizing, cutting,
				measuring, weighing, wrapping, labeling, palletizing, or other similar
				processes necessary to prepare or package manufactured products in a manner
				suitable for sale or delivery to customers as finished goods, or suitable for
				the transport of work in process at or among manufacturing plants for further
				manufacturing, and the movement of such finished goods or work in process to a
				storage or distribution area at a manufacturing plant.
(m) "Packaging supplies" means materials,
				whether reusable or single-use, used in a packaging operation solely for
				packaging tangible personal property. The term includes but is not limited to
				containers, sacks, boxes, wraps, fillers, cones, cores, pallets, and bags. The
				term also includes such items as labels, invoices, packing slips, tags, and
				plates affixed to the product or affixed to or inserted into product
				packaging.
(n) "Real property"
				means land, any buildings thereon, and any fixtures attached thereto.
(o) "Repair or replacement part" means a part
				that is used to maintain, repair, restore, install, or upgrade machinery or
				equipment that is necessary and integral to the manufacture of tangible
				personal property. Examples of repair and replacement parts may include but are
				not limited to oils, greases, hydraulic fluids, coolants, lubricants, machinery
				clothing, molds, dies, waxes, jigs, and other interchangeable
				tooling.
(p) "Substantial purpose"
				means the purpose for which an item of tangible personal property is used more
				than one-third of the total amount of time that the item is in use.
				Alternatively, instead of time, the purpose may be measured in terms of other
				applicable criteria such as the number of items produced.