Virginia Administrative Code › Title 23 - TAXATION › Agency 10 - DEPARTMENT OF TAXATION › Chapter 210 - RETAIL SALES AND USE TAX › Section 23VAC10-210-920 - Manufacturing and processing

Current through Register Vol. 40, No. 24, July 15, 2024
A.
				Generally. The retail sales and use tax does not apply to the following types
				of tangible personal property when used or consumed by an industrial
				manufacturer or processor of products for sale or resale: (As used in this
				section, the terms "manufacturing and processing" include "converting.")
1. Industrial materials for future
				manufacturing or processing into articles of tangible personal property for
				resale where such industrial materials either enter into the production of or
				become a component part of the finished product;
2. Industrial materials that are coated upon
				or impregnated into the product at any stage of its manufacture or
				processing;
3. Machinery, tools or
				repair parts, fuel, power, energy, or supplies used directly in manufacturing
				or processing.
4. Materials,
				containers, labels, sacks, cans, boxes, drums or bags for future use for
				packaging tangible personal property for shipment or sale (whether returnable
				or nonreturnable);
5. Tangible
				personal property purchased for use or consumption directly and exclusively in
				basic research in the experimental or laboratory sense or research and
				development in the experimental or laboratory sense (see also
				23VAC10-210-3070 through
				23VAC10-210-3074 );
6. Gas, electricity or water received through
				mains, lines, or pipes;
7. Tangible
				personal property used directly in those necessary ancillary activities of
				newspaper and magazine printing when such activities are performed by the
				publisher of any newspaper or magazine for sale daily or regularly at average
				intervals not exceeding three months and any newspaper or magazine for
				distribution at no cost published daily or regularly at average intervals not
				exceeding three months.
Unless otherwise specified, only the types of tangible
				  personal property listed above may be purchased exclusive of the tax by an
				  industrial manufacturer or processor for direct use in producing products for
				  sale or resale. Other production items and items of tangible personal property
				  used indirectly in production activities are deemed subject to the tax.
Based upon the foregoing, for a business to obtain the
				  exemption, it first must be manufacturing or processing products for sale or
				  resale and secondly, such production must be industrial in nature. The
				  determination of whether an operation is industrial in nature shall be made
				  without regard to plant, size, finished product inventory size, degree of
				  mechanization, amount of capital investment, number of employees or other
				  factors relating principally to size. Third, the types of tangible personal
				  property which may be purchased exclusive of the tax by an industrial producer
				  are machinery and tools, raw materials or one of the other types specifically
				  set forth above, and fourth, such types of tangible personal property must be
				  used directly in the manufacturing or processing operation. In addition, the
				  statutory definitions of "manufacturing" and "processing" under the Retail
				  Sales and Use Tax Act limit the industrial exemption to activities conducted at
				  a single plant site (see also subdivision B 2 of this section).