This rule is intended to illustrate the application of the production exemption to the lumber manufacturing industry. The provisions of this rule are based upon the usual methods of doing business used in the industry generally. Factual differences in the manner in which a specific taxpayer may conduct its business can result in determinations different from those stated in this rule. In cases not covered by this rule, the general principles stated in Rule 079 of these rules will control. Some equipment may be used for more than one purpose. Determinations of taxability will be based upon the equipment's primary use. This rule is limited in application to the manufacturing of rough and finished lumber and does not encompass the manufacturing of plywood, particleboard, veneer, or paper products.
01.
Nontaxable Activities. Generally considered as nontaxable activities are the following:
a. Log receiving including log loaders, cranes, and front end loaders.
b. Log deck/log pond including log loading equipment and boats moving logs from the storage area to the debarker; sprinkler equipment when used for prevention of product deterioration; and devices used to detect metal in logs.
c. Debarking equipment used to strip bark from logs including conveyor equipment for moving debarked logs further into the mill or for conveying bark when bark is used as boiler fuel or when conveying bark to a further processing stage.
d. Chipper, used to produce chips including chip storage bins and pneumatic conveyors.
e. Mill deck, as used for grading and cutting to length.
f. Headrig/shotgun, as used for sawing logs.
g. Edger, as used for edging rough lumber.
h. Trimmer, as used for trimming to length.
i. Resaw, as used for producing the proper thickness.
j. Green chain, as used to determine according to size and species the amount of time required in the dry kiln.
k. Dry kiln, as used to reduce moisture content. This exemption encompasses fire brick, steam pipe and fans inside the kiln but does not include improvements to real property.
l. Unstackers.
m. Planers, as used for finishing, grading and grade stamping of specialty products.
n. Boiler when used for the generation of steam used to operate production equipment.
o. Powerhouse when used to generate power used to operate production equipment.
p. Waste collection, as used for the collection of waste products for use as fuel for the boiler, generally referred to as hog fuel.
q. Lumber wrap and steel strapping used for packaging material.
r. Pollution control equipment when required by a state or federal agency.
s. Equipment used primarily to install exempt equipment.
t. Equipment used primarily to fabricate exempt equipment.
u. Safety equipment and supplies required by a state or federal agency and used in a production area.
v. Equipment and supplies used in the performance of a quality control function which is an integral and necessary step in maintaining specific product standards.
02.
Taxable Activities. Generally considered as taxable activities are the following:
a. Saw filing activities using saw filing equipment and saw filing supplies.
b. Shipping, including loading equipment and strapping, seals, and binders used in shipping activities to secure lumber on railroad cars, trucks, etc.
c. Cleanup.
d. Equipment used to repair or maintain production equipment.
e. Equipment used primarily to construct, improve, alter or repair real property.
f. Safety equipment and supplies used in an area where no manufacturing occurs such as an office, or which are not required by a state or federal agency even if used in a production area.
g. Other items specifically identified as taxable in Rule 079 of these rules.
03.
Exemption Certificate. Persons engaged in lumber manufacturing who wish to purchase goods that qualify for this exemption without paying sales tax complete an exemption certificate. See Rule 128 of these rules.
