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Stone and oil used in the product of asphalt are taxable if the asphalt is used for contracts with the state for highway improvements. In most cases a manufacturing exemption would be applicable since the stone and oil and being produced into asphalt. However, the highway improvements are considered construction projects where materials are being affixed to real property, thus making the taxpayer ineligible to use the manufacturing exemption. (Golden Eagle Construction Company Inc. v. Commonwealth of Pennsylvania, Pennsylvania Commonwealth Court, No. 339 F.R.2000, December 10, 2002)


A Pennsylvania manufacturer contested that their equipment, used at their distribution facility, was essential in the production of its product and that the equipment met the criteria for classes of equipment to which the exemption applies, so therefore should qualify for the state’s manufacturing exemption. The court maintained that the manufacturer’s purchase of equipment for its distribution facility was subject to use tax because the products were not changed in any way after they reached the distribution facility and because the facility was not engaged in manufacturing activities. The shelves, forklifts, conveyors, and packing equipment were also not used to ship the company’s products to retail customers, but rather to other manufacturers and distributors who were not “ultimate consumers” as defined by the statute. (AMP, Inc. v. Pennsylvania, Pennsylvania Commonwealth Court, No. 837 F.R. 1998, February 22, 2002)



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