October 19, 1983
__________ ("Company") is engaged in the business of manufacturing police and fire badges, medals, trophies, novelties and other similar items. You inquire whether the sales tax applies to the Company's purchases of certain pollution control and safety equipment used in its manufacturing plant in connection with the following operations: electroplating, acid sink dipping, grinding, grease buffing, polishing, sanding, "rubbing off", lucite molding, soldering, painting, lacquering and degreasing.
In the electroplating operation, items to be sold are dipped by hand into acid tanks and plating tanks. Both kinds of tanks are surrounded by steam jackets that control the temperature of the liquid in the tanks. The tanks also contain mechanical devices that control the flow of liquids into and out of the tanks. In addition, the plating tanks incorporate agitators and electrically charged posts.
The liquids in the tanks are piped from the tanks to waste water treatment equipment. The equipment neutralizes or removes hazardous chemicals in the waste water. After treatment, part of the treated liquid is piped back to the tanks, and the rest is discharged into a municipal sewer system.
Attached to each acid tank and plating tank is an exhaust system designed to protect workers at the plant from noxious fumes.
In acid sink dipping, items to be sold are manually dipped into sinks containing acid. The sinks have mechanical devices that control the flow of acid into and out of the sinks. Attached to the sinks are scrubbers used to remove acid from fumes prior to release into the atmosphere.
In the grinding, grease buffing, polishing, sanding and rubbing off operations, workers use electrically powered tools to effect a physical change in items to be sold. Dust collectors precipitate solids from the air exhausted from the work areas where these operations are conducted, and accumulate the solids for disposal, so that the workers will not be exposed to excessive dust. The dust collectors are attached by duct work to the tools themselves.
In the lucite molding operation, workers pour chemicals that become part of items to be sold into molds on a work bench for curing. The work benches themselves have no mechanical, electric or electronic parts. Hoods and exhaust and ventilating equipment are attached to the work benches to remove noxious fumes.
In the soldering and painting operations, workers at benches effect a physical change in items to be sold, using tools that are attached to the benches. The benches themselves have no mechanical, electric or electronic parts. Exhaust systems that remove noxious fumes from the work area are attached to the benches.
In the lacquering operation, items to be sold are sprayed by hand with lacquer in a booth. The booth is attached to a table with an integral "lazy Susan" on which items are manually turned during the lacquering. After the items are sprayed, they are baked in a lacquer oven. Exhaust systems are attached both to the booths and the oven, to protect workers from flammable fumes.
In degreasing, items to be sold are suspended in a degreasing tank. The items are sprayed from a nozzle that is attached to the tank and drains liquid through a hose from the tank. Also attached to each tank is a still for distilling the degreasing solution.
Exhaust systems designed to vent volatile fumes are attached to the degreasing tanks.
The particular items about which you inquire are the following: the waste water treatment equipment, the acid fume scrubbers, the dust collectors, the hoods and the exhaust and ventilating equipment attached to the lucite molding benches, and the exhaust systems for the acid tanks and plating tanks, for the soldering and painting benches, and for the lacquer booth, the lacquer oven, and the degreasing tanks.
Sales of machinery, or replacement parts thereof, used directly and exclusively in an industrial plant in the actual manufacture, conversion or processing of tangible personal property to be sold, are exempt from the sales tax under General Laws Chapter 64H, Section 6(s). Section 6(s) further provides that machinery is deemed to be used directly and exclusively in actual manufacture, conversion or processing only where it is:
"used solely during a manufacturing, conversion or processing operation to effect a direct and immediate physical change upon the tangible personal property to be sold; to guide or measure a direct and immediate physical change upon such property where such function is an integral and essential part of tuning, verifying or aligning the component parts of such property; or to test or measure such property where such function is an integral part of the production flow or function; used solely to store, transport, convey or handle such property during the manufacturing, converting, or processing operations heretofore specified; or used solely to place such property in the container, package or wrapping in which such property is normally sold to the ultimate consumer thereof...[M]achinery used during any manufacturing, converting or processing, conveying or packaging operation or function or for any other purpose, except as heretofore specified, shall not be exempt under this paragraph even though such operation, function or purpose is an integral or essential part of a continuous production flow or manufacturing process."
Sales and Use Tax Regulation 830 CMR 16.03 ("Machinery Exemption") defines "machinery" for purposes of the exemption as: "a mechanical, electrical or electronic device designed to be used and which is used in manufacturing, converting or processing tangible personal property to be sold. It includes not only the basic unit but also any adjunct or attachment necessary for the basic unit to accomplish its intended function."
The question whether this machinery qualifies for an exemption under section 6(s) of Ch. 64H requires a two part inquiry. The machinery must be used directly and exclusively in an industrial plant in the actual manufacture of the tangible personal property to be sold, and it must effect a direct and immediate physical change upon the personal property to be sold. Pollution control equipment, although it may be required by certain environmental laws and regulations, does not effect any physical change in the personal property to be sold, and it is not necessary to the actual manufacturing process.
Based on the foregoing, it is ruled that the Company's purchases of the waste water treatment equipment, the acid fume scrubbers, the dust collectors, the hoods and the exhaust and ventilating equipment attached to the lucite molding benches, and the exhaust systems for the acid tanks and plating tanks, for the soldering and painting benches, and for the lacquer booth, the lacquer oven, and the degreasing tanks, are subject to the sales tax.
Very truly yours,
/s/Ira A. Jackson
Ira A. Jackson
Commissioner of Revenue