The Alabama Tax Tribunal denied a taxpayer’s claim for using the reduced 1.5% manufacturing sales tax rate on purchases of heavy equipment used for moving logs in a wet yard processing area.
The taxpayer – a producer of wood chips – contended that heavy equipment such as log cranes, excavators, loaders, and forklifts were purchased exclusively to move logs through a manufacturing process once the logs entered a wet yard processing area. Accordingly, the taxpayer argued that the equipment should be subject to the state’s reduced 1.5% manufacturing sales tax rate. The Revenue Department denied the request, asserting that the equipment was not involved in manufacturing.
Upon receiving logs, the taxpayer moved them to a “wet yard” where the logs were positioned by the heavy equipment to receive continuous treatment involving a chemical to maintain the integrity of the logs. The logs were later moved to a debarking drum then delivered to the wood chipper. The taxpayer asserted that the wet yard is not just for storage of the logs but is a facility “where raw timber is being treated continuously to maintain the integrity of the raw materials.” As such, they argued that the wet yard is part of the manufacturing process.
In a memo, the taxpayer stated the wet yard is a controlled conditioning system that maintains logs at the correct moisture level to preserve fiber integrity and ensure efficient debarking and chipping. The taxpayer claimed that the wet yard performs the same function as other recognized preparatory steps in manufacturing in that it readies raw material for transformation.
The Tax Tribunal determined that there was no evidence in the record to support the taxpayer’s claims. No evidence was provided as to what chemical is used to treat the logs or how the treatment process maintains the correct moisture level to preserve the integrity of the logs. As a result, the Tax Tribunal determined that the taxpayer was not entitled to the reduced 1.5% manufacturing sales tax rate. (Alabama Chips, Inc. v. Alabama Department of Revenue, ALATT, No. S. 24-0251-JP, October 23, 2025)