The Iowa Court of Appeals upheld a decision made by a district court that exempted a spectrographic color-matching machine from Iowa’s sales and use taxes. The machine determines the precise formula for mixing the exact shades of paint color desired. The court determined that the taxpayer was a manufacturer and that the machine is used in the direct process of manufacturing paint under Code Sec. 428.20 and 422.45(27). (The Sherwin-Williams Co. v. Iowa Department of Revenue, Iowa Court of Appeals, No. 8-254/07-1534, October 15, 2008)
UPDATE: Iowa has enacted narrowing legislation that makes changes to the terms “Manufacturer” and “Manufacturing” for purposes of the state’s manufacturing exemption. The legislation states that “Manufacturing” does not include activities occurring on premises primarily used to make retail sales. This law change seems to be in direct conflict with the finding in the Sherwin Williams case which found that a manufacturer did not need to primarily be a manufacturer.