FACTS: Baker Corporation, a Massachusetts vendor, manufactures plastic items at its production facility in the Commonwealth. For use in this facility, Baker purchased air conditioning equipment in addition to central air conditioning; this additional equipment cools and tempers the plastic into a hard, durable product.

Baker's production facility is an industrial plant within the meaning of G.L. c. 64H, § 6(s).

ISSUE: Is Baker's purchase of the air conditioning for use in manufacturing plastic items exempt from the sales tax as machinery used directly and exclusively in the manufacture, conversion or processing of tangible personal property to be sold?

LAW: Under G.L. c. 64H, § 6(s), sales of machinery are exempt from sales tax if the machinery is used directly and exclusively in an industrial plant in the actual manufacture, conversion or processing of tangible personal property to be sold. Machinery qualifies for this exemption only if it is used solely during a manufacturing process to do one of the following:

1. effect a direct and immediate physical change on tangible personal property to be sold;

2. guide or measure such a direct and immediate physical change, if the guiding or measuring is an integral and essential part of tuning, verifying or aligning the components of the property to be sold;

3. test or measure the property itself, if that testing or measuring is an integral part of the flow of production or the production function;

4. store, transport, convey or handle the property during manufacturing, conversion or processing operations; or

5. package the property in the manner in which it will normally be sold to the ordinary consumer.

Unless the machinery is so used, it is not exempt under this provision even though it may otherwise be considered an integral part of the manufacturing process.

DISCUSSION: Only machinery which performs at least one of the five functions listed in G.L. c. 64H, § 6(s) is exempt from the sales tax under this provision. Thus machinery may qualify for the exemption if the machinery is used solely during a manufacturing process to effect a direct and immediate physical change in tangible personal property to be sold. There is, however, no requirement that this physical change be direct or immediate in the sense of physical contact.

In this case, the air conditioning is used to temper the plastic items, making them hard and durable. The reduction in the temperature of the plastic is a direct and immediate physical change in the property to be sold. Since physical contact between the air conditioning equipment and the plastic itself is unnecessary, this function satisfies the statutory requirement and the air conditioning qualifies for the exemption.

DIRECTIVE: Baker's purchase of the air conditioning equipment for use in the manufacture of the plastic items is exempt from the sales tax as machinery used directly and exclusively in the manufacture, conversion or processing of tangible personal property to be sold.

REFERENCE: G.L. c. 64H, § 6(s).

/s/Stephen W. Kidder
Stephen W. Kidder
Commissioner of Revenue

November 30, 1987

DD 87-8

This Directive represents the official position of the Department of Revenue on the application of the law to the facts as stated. The Department and its personnel will follow this Directive, and taxpayers may rely upon it, unless it is revoked or modified pursuant to 830 C.M.R. § 62C.01(5)(e). In applying this Directive, however, the effect of subsequent legislation, regulations, court decisions, Directives, and TIRs must be considered, and Department personnel and taxpayers may rely upon this Directive only if the facts, circumstances and issues presented in other cases are substantially the same as those set forth in this Directive.