In a letter ruling, the Missouri Department of Revenue discussed the requirements for machinery and equipment used in a qualifying material recovery processing plant. A taxpayer who recovers sawdust and converts it into wood pellets qualifies as a material recovery processing plant for the purposes of the state’s sales and use tax exemption so long as its machinery and equipment is substantially used in the recovery of materials into a usable product. If the taxpayer didn’t recover the sawdust to make a new product, the sawdust would become a part of the solid waste stream. As such, the taxpayer qualifies for the material recovery processing plant exemption so long as their equipment is substantially used for the recovery. The pulp wood logs that the taxpayer purchases to convert into wood pellets do not qualify as recovered materials because they could have been used as firewood and as such, were not removed from the solid waste stream. The diesel fuel that the taxpayer purchases for equipment and machinery at its facility is exempt from state and local use tax, but not local sales tax. The fuel is used in the processing of recovered materials as well as the manufacturing of wood pellets. As a result, the fuel qualifies for the state and local use tax exemption. (Letter Ruling No. LR6540, Missouri Department of Revenue, November 24, 2010)