May a Connecticut manufacturer buy air compressors tax-free when they eject parts from dies, sandblast finished products, and also power production machinery?

Plain-English summary

A manufacturer used three air compressors in its production process. One compressor blew a manufactured part out of a die so workers did not have to handle it before the next stage. Two others primarily powered sandblasting, blowing beads onto parts during the final finishing stage. Those two also powered other production-line machines about 40% of the time.

DRS ruled that all three compressors qualified for the manufacturing exemption under Conn. Gen. Stat. § 12-412(34) and Conn. Agencies Regs. §§ 12-412-11b(a)(9) and (11), assuming the company otherwise qualified as a manufacturer. The die-ejection and sandblasting functions were direct uses in the manufacturing production process and had a direct effect on the finished product to be sold.

The fact that two compressors also powered machinery -- an indirect manufacturing use -- did not destroy their exempt status because they were used directly for the qualifying sandblasting work.

What this means for you

Document each compressor's production function

The favorable result rested on specific direct uses: moving a part from a die and applying the final sandblasted finish.

Mixed direct and indirect use did not automatically disqualify the equipment

The sandblasting compressors remained exempt even though they spent about 40% of their time powering other production machinery.

Manufacturer status was assumed

The ruling expressly conditioned its answer on the company qualifying as a manufacturer. It did not decide that threshold issue.

Common questions

Was the die-ejection compressor exempt? Yes. DRS treated blowing the part from the die as direct use in manufacturing.

Were the sandblasting compressors exempt? Yes. Sandblasting was part of the final production stage and directly affected the finished product.

Did the 40% machinery-powering use make them taxable? No. The ruling said the indirect use did not affect exempt status when the compressors also had qualifying direct manufacturing uses.

Citations and references

• Conn. Gen. Stat. § 12-412(34) -- manufacturing machinery exemption applied by the ruling.
• Conn. Agencies Regs. §§ 12-412-11b(a)(9) and (11) -- direct-use provisions cited by DRS.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 91-7

Original ruling text

Ruling 91-7, Manufacturing / Air Compressors

Ruling 91-7

Manufacturing Air Compressors

FACTS:

Company purchases air compressors which serve various purposes in its manufacturing production process. One compressor is used solely to blow a part out of a die so that the part is not required to be handled in order to move it to the next production stage. The compressor is not used for any other process.

Two other air compressors are used primarily for sandblasting by blowing beads onto a part for the final finishing stage of production. Incidental to this use is that these two compressors are used for a portion of the time (approximately 40%) to power machines on the production line.

ISSUE:

Whether air compressors may be purchased exempt from sales tax when they are to be used directly in the manufacturing production process.

RULING:

Assuming that Company qualifies as a manufacturer, its use of the air compressors described herein qualifies for an exemption from sales and use taxes as machinery used directly in the manufacturing production process pursuant to Section 12-412(34) of the Connecticut General Statutes and Sections 12-412-11b(a)(9) and (11) of the Regulations of Connecticut State Agencies. Under these circumstances, the compressors have a direct effect on the finished product to be sold.

When an air compressor is used directly in the manufacturing production process, such as the die blowing and sandblasting described herein, the fact that the air compressor also powers machinery (i.e. is used indirectly in the manufacturing production process) does not affect its tax exempt status.

LEGAL DIVISION

April 2, 1991