Date: | 08/28/1998 |
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Organization: | Massachusetts Department of Revenue |
Referenced Sources: | Massachusetts General Laws |
In "Asphalt Producing" Corporation v. Commissioner, the Appellate Tax Board determined that raw materials and equipment purchased by the taxpayer and used to produce asphalt were exempt from the sales tax. The taxpayer sold some of the asphalt that it produced to certain customers without any accompanying service. The taxpayer used the remainder of the asphalt to pave roads, parking lots, driveways, tennis courts and other similar projects pursuant to contracts that it entered into with its other customers.
The Board ruled that the raw materials that the taxpayer used to produce the asphalt were exempt under G.L. c. 64H, § 6(r), because they became "an ingredient or component part of tangible personal property to be sold. …" Specifically, the Board determined that the raw materials were an ingredient or component part of the asphalt, and that the taxpayer sold all of the asphalt that it produced. In reaching this conclusion, the Board rejected the Commissioner's contention that the asphalt the taxpayer used in the performance of the paving contracts was used by the taxpayer in the performance of construction contracts and, therefore, was not sold. Instead, the Board concluded that the taxpayer had sold and installed the paving materials that it had incorporated into, or affixed to, its customers' real property. The Board appears to have concluded that the taxpayer transferred title to, or possession of, the paving materials to its customers when it installed, affixed or incorporated the paving materials into the customers' real property, and that the transfer occurred at the same time as, or immediately before, such installation, affixation or incorporation.
Likewise, the Board concluded that the equipment used to produce the asphalt was exempt under G.L. c. 64H, § 6(s), because it was used "directly and exclusively … in an industrial plant in the actual manufacture of tangible personal property to be sold." Again, the Board concluded that the taxpayer had sold the paving materials to its customers and then installed, affixed or incorporated the paving materials into the customers' real property.
Finally, the Board ruled in favor of the taxpayer with respect to several factual issues relating to the eligibility of certain specific equipment for the exemption afforded by G.L. c. 64H, § 6(s).
This Technical Information Release (TIR) explains the sales and use tax obligations of taxpayers that produce asphalt and concrete that they then sell to customers either (i) without additional services or (ii) as part of a contract pursuant to which the asphalt or concrete is installed, affixed or otherwise physically incorporated into real property owned by the customers. This TIR does not apply to any other transactions. As used in this TIR, the terms asphalt and concrete include any related paving materials such as sand or stone products that are installed, affixed or otherwise physically incorporated into real property along with the asphalt or concrete. This TIR does not address the portion of the "Asphalt Producing" decision concerning the eligibility of specific equipment for the manufacturing exemption afforded by G.L. c. 64H, § 6(s). Because the application of the exemption under Section 6(s) depends on how the equipment is actually used, the Commissioner must continue to determine the applicability of the exemption in light of the specific facts and circumstances in each case.