Was electricity passed through salt brine during a Georgia manufacturing process exempt as an industrial material beginning in 2013?

Plain-English summary

Beginning January 1, 2013, electricity used in the described electrochemical manufacturing process was exempt as an industrial material. The manufacturer passed electricity through salt brine, transferring electrons into the solution and triggering the reaction that converted the salt into the finished industrial product.

The Department treated that electricity as coated upon or impregnated into the product during manufacture. The exemption was limited to electricity used in that manner; electricity used for other purposes fell outside the ruling.

Common questions

Q: Was all electricity used at the Georgia plant exempt?

A: No. Only electricity used in the described production process qualified under the industrial-material provision.

Q: When did the exemption apply?

A: January 1, 2013, when the statutory change discussed in the ruling took effect.

Citations and references

• O.C.G.A. §§ 48-8-30(a), 48-8-2(31), (33) -- tax on retail sales, including electricity
• O.C.G.A. § 48-8-3.2(a)(5), (b) -- industrial-material exemption effective January 1, 2013
• O.C.G.A. § 48-8-3(35)(B) -- pre-2013 exclusion of electricity used for manufacturing power
• H.B. 386 (2012) -- removal of the electricity exclusion

Source

• Landing page: Georgia Sales & Use Tax Letter Rulings
• Original PDF: LR SUT-2012-03

Original ruling text

State of Georgia
Douglas J. MacGinnitie
Commissioner

Department of Revenue

Administrative Division – Office of Tax Policy
1800 Century Blvd., Suite 15107
Atlanta, Georgia 30345-3205
(404) 417- 6649

Frank M. O’Connell
Director

December 27, 2012
Georgia Letter Ruling No. 2012-12-27-01 Manufacturing
This letter is in response to your request for guidance on the application of Georgia sales and use tax to
electricity purchases.
Facts
Taxpayer manufactures [a certain] industrial salt at its plant facility located in Georgia and uses electricity
in the manufacturing process.
[DETAILED DESCRIPTION OF MANUFACTURING PROCESS REDACTED]
Taxpayer’s manufacturing process relies on passing electricity through a solution in a series of
electrochemical cells, resulting in salt being converted into [the industrial salt]. The amount of [industrial
salt] produced at the facility is directly proportional to the number of electrochemical cells multiplied by
the amount of current being passed through them.
Issue
Will Taxpayer’s purchases and use of electricity as described above in the production of [industrial salt]
at its Georgia manufacturing facility be fully exempt from Georgia sales and use tax as an industrial
material under O.C.G.A. § 48-8-3.2(b) beginning January 1, 2013?
Analysis
Georgia imposes sales tax on the retail purchase, retail sale, rental, storage, use, or consumption of
tangible personal property and on certain services. 1 “Retail sale” or a “sale at retail” means any sale,
lease, or rental for any purpose other than for resale, sublease, or subrent and specifically includes the sale
of electricity. 2 A “sale” is any transfer of title or possession, transfer of title and possession, exchange,
barter, lease, or rental, conditional or otherwise, in any manner or by any means of any kind of tangible
personal property for a consideration. 3

1

O.C.G.A. § 48-8-30(a).
O.C.G.A. § 48-8-2(31).
3
O.C.G.A. § 48-8-3(33).
2

An Equal Opportunity Employer

December 27, 2012
Page 2 of 2

Effective January 1, 2013, a sales and use tax exemption will be available for “…the sale, use, storage, or
consumption of industrial materials or packaging supplies...” 4 The term “industrial materials” is defined
to include:

1. Materials for future processing, manufacture, or conversion into articles of tangible
   personal property for resale when the industrial materials become a component part of the
   finished product;
2. Materials that are coated upon or impregnated into the product at any stage of its
   processing, manufacture, or conversion, even though such materials do not remain a
   component part of the finished product for sale; and
3. Raw materials. 5
   Taxpayer’s use of electricity described above qualifies under the second prong because the electricity is
   impregnated into the product during the manufacturing process. The electricity Taxpayer uses is passed
   through the salt brine raw material to trigger a chemical reaction converting the salt into the product that
   is offered for sale. Electrons from the electricity are transferred to the salt brine solution, which is then
   converted into [the industrial salt]. The electricity is a catalyst that comes into direct contact with and is
   impregnated into the product during its manufacture. Therefore, effective January 1, 2013, the electricity
   used in the Georgia plant in the manner described above is exempt under O.C.G.A. § 48-8-3.2(b) as an
   industrial material.
   This application of the industrial material exemption follows from the express wording of certain changes
   in H.B. 386 (signed into law on April 19, 2012) and its overall intent. Before January 1, 2013, the
   exemption for industrial materials does not include “natural or artificial gas, oil, gasoline, electricity, solid
   fuel, ice, or other materials used for heat, light, power, or refrigeration in any phase of the manufacturing,
   processing, or converting process.” 6 In H.B. 386, the General Assembly removed the electricity exclusion
   from the industrial material exemption, thus demonstrating its intent that electricity otherwise meeting the
   requirements as an industrial material would be fully exempt.
   Ruling
   Effective January 1, 2013, electricity Taxpayer purchases and uses as described above in the production
   of [industrial salt] at its Georgia manufacturing facility will be fully exempt from Georgia sales and use
   tax as an industrial material under O.C.G.A. § 48-8-3.2(b). Electricity used for other purposes does not
   fall within the scope of the exemption in O.C.G.A. § 48-8-3.2(b).
   The opinions expressed in this ruling are based upon the information contained in your request and
   limited to the specific transactions and taxpayer in question. Should the circumstances regarding the
   transactions change, or differ materially from those represented, then this ruling may become invalid. In
   addition, please be advised that subsequent statutory or administrative rule changes or judicial
   interpretations of the Statutes or Rules upon which this advice is based may subject similar future
   transactions to a different tax treatment than that expressed in this response.

4

O.C.G.A. § 48-8-3.2(b).
O.C.G.A. § 48-8-3.2(a)(5).
6
O.C.G.A. § 48-8-3(35)(B).
5