Indiana Administrative Code
Title 45 - DEPARTMENT OF STATE REVENUE
Article 2.2 - SALES AND USE TAX
Rule 5 - Exempt Transactions of a Retail Merchant
Section 5-11 - Sales of tangible personal property used in the direct production of manufacturing or agricultural machinery, tools and equipment

Universal Citation: 45 IN Admin Code 5-11

Current through September 18, 2024

Authority: IC 6-8.1-3-3

Affected: IC 6-2.5-5-2; IC 6-2.5-5-3

Sec. 11.

(a) The state gross retail tax shall not apply to sales of tangible personal property to be directly used by the purchaser in the direct production or manufacture of any manufacturing or agricultural machinery, tools, and equipment described in IC 6-2.5-5-2 or 6-2.5-5-3[IC 6-2.5-5-3 ].

(b) The exemption provided in this regulation [45 IAC 2.2] extends only to tangible personal property directly used in the direct production of manufacturing or agricultural machinery, tools, and equipment to be used by such manufacturer or producer.

(c) The state gross retail tax shall not apply to purchases of tangible personal property to be directly used by the purchaser in the production or manufacturing process of any manufacturing or agricultural machinery, tools, or equipment, provided that the machinery, tools, and equipment are directly used in the production process; i.e., they have an immediate effect upon the article being produced or manufactured. The property has an immediate effect on the article being produced if it is an essential and integral part of an integrated process which produces tangible personal property.

(d) For the application of the rules [subsections] above, refer to Regs. 6-2.5-5-3 [ 45 IAC 2.2-5-8 through 45 IAC 2.2-5-10 ] with respect to tangible personal property used directly in the following activities: pre-production and post-production activities; storage; transportation; tangible personal property which has an immediate effect upon the article produced; maintenance and replacement; testing and inspection; and managerial, sales, and other nonoperational activities.

(e) Energy equipment.

(1) Equipment used to modify energy purchased from public utilities for the production process is exempt if the equipment is used to modify the utilities for use by exempt equipment.

(2) Equipment used to create energy that could otherwise be purchased exempt from a public utility for use by exempt equipment is exempt.

(3) When any equipment qualifies as essential and integral to the production process and also is used in an alternative nonessential and/or non-integrated manner, the exemption shall only apply to the percentage (%) of use of the equipment used in the exempt manner.

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