Is retipping a manufacturer's worn carbide saw blades a taxable repair service, or an exempt purchase of manufacturing tools?

Note — dated guidance. DRS marks this Ruling "not current … provided for reference purposes only," and it has been clarified by Ruling 94-4 and obsoleted in part by Announcement (AN) 2000(8). The summary below explains what Ruling 91-13 said in 1991; verify the current treatment of tool repair/retipping and the manufacturing exemption with DRS before relying on it.

Plain-English summary

A company that makes kitchen cabinets from wood used carbide-tipped circular saw blades to cut and groove the cabinet pieces. Because the blades wear out fast, the company kept replacing them — sometimes buying new blades, and sometimes sending worn blades out to be retipped (the worn carbide tips are removed and new tips are soldered on). It asked whether the retipping is a taxable repair service under Conn. Gen. Stat. § 12-407(2)(i)(DD).

DRS split the answer into the service and the goods:

• Retipping = taxable repair. Retipping is a taxable repair or maintenance service under § 12-407(2)(i)(DD). It merely refurbishes the saw — which is a tool — and is not the purchase of a new replacement blade. So the charge for retipping is subject to sales and use tax.
• A new replacement blade = exempt manufacturing tool. Buying a new replacement blade can be exempt under § 12-412(18), which exempts tools used directly in a manufacturing plant in the actual fabrication of the finished product to be sold. The saw blade is such a tool, so a new blade qualifies for the manufacturing exemption.

What this means for you

Fixing a tool is a taxable service; buying the tool can be exempt

The line DRS drew is between repairing/maintaining an existing tool (taxable service) and acquiring a qualifying manufacturing tool (exempt purchase). Refurbishing brings your worn tool back to life — that's a service, and § 12-407(2)(i)(DD) taxes repair and maintenance services to tangible personal property. Buying the tool new is a different transaction that can ride the manufacturing exemption.

The manufacturing exemption covers the tool, not the repair of it

Section 12-412(18) exempts tools used directly in fabricating the product you sell. But DRS did not extend that exemption to the repair of those tools. So a manufacturer can buy exempt blades yet still owe tax when it pays to have worn blades retipped.

This treatment has been revisited — confirm the current rule

Because DRS marks this ruling not current (clarified by Ruling 94-4, obsoleted in part by AN 2000(8)), don't apply the retipping-is-taxable conclusion to today's transactions without checking. Ruling 94-4 later addressed a closely related situation (replating/retipping of grinding wheels and the manufacturing-material vs. repair-labor split), and the taxation of these services has continued to develop. Verify the current law.

Common questions

Q: Is having a worn saw blade retipped a taxable service in Connecticut?
A: Under this 1991 ruling, yes — retipping was a taxable repair or maintenance service under § 12-407(2)(i)(DD), because it refurbishes the tool rather than being the purchase of a new blade. Note the ruling is marked not current, so confirm today's treatment.

Q: Can a manufacturer buy new saw blades exempt?
A: Yes — a new replacement blade can qualify for the manufacturing exemption under § 12-412(18) as a tool used directly in the actual fabrication of the finished product to be sold.

Q: Why is buying the blade exempt but repairing it taxable?
A: They're different transactions. Acquiring a qualifying manufacturing tool is an exempt purchase; paying to repair or maintain a tool is a taxable service under § 12-407(2)(i)(DD).

Q: Can I rely on this today?
A: Not without checking. DRS marks it "not current," it was clarified by Ruling 94-4, and it was obsoleted in part by AN 2000(8). Confirm the current rules with DRS or a Connecticut tax professional.

Citations and references

Statutes:

• Conn. Gen. Stat. § 12-407(2)(i)(DD) — repair or maintenance services to tangible personal property are a taxable "sale"
• Conn. Gen. Stat. § 12-412(18) — exempts tools used directly in a manufacturing plant in the actual fabrication of the finished product to be sold

Status:

• Marked "not current … reference purposes only"; clarified by Ruling 94-4; obsoleted in part by Announcement (AN) 2000(8).

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 91-13

Original ruling text

Ruling 91-13, Repair Services

This information is not current and is being provided for reference purposes only

Ruling 91-13

Repair Services

Ruling has been clarified by   Ruling 94-4 ; obsoleted in part by   AN 2000(8)

FACTS:

In manufacturing kitchen cabinets from wood products, Company uses round carbide-tipped saw blades in the manufacturing process for cutting and grooving various cabinet pieces for assembly. Because the saw blades wear out quickly, Company continually replaces them with new replacement blades or with blades which have been sent out to be retipped. The retipping process involves the removal of the worn carbide steel blade tips and the soldering on of the new replacement tips.

ISSUE:

Does the retipping of the saw blades constitute a repair service subject to sales and use taxes under Conn. Gen. Stat. §12-407(2)(i)(DD)?

RULING:

The retipping of the saw blades constitutes a taxable repair or maintenance service under Conn. Gen. Stat. §12-407(2)(i)(DD). This process merely refurbishes the saw, which is a tool, and does not constitute the purchase of a new replacement blade.

New replacement blades may be purchased exempt from sales and use taxes under Conn. Gen. Stat. §12-412(18) which exempts tools used directly in a manufacturing plant in the actual fabrication of the finished product to be sold.

LEGAL DIVISION

April 9, 1991