Concrete Foundations Ineligible for Sales Tax Exemption

Materials that were used by a Wyoming refinery to construct foundations for manufacturing equipment did not qualify for a sales and use tax exemption on manufacturing machinery. It was determined that the foundation materials were real property, not tangible personal property. The taxpayer argued that the foundations fit the definition of “adjunct or attachment necessary for the basic unit to accomplish its intended function” and therefore are included within the definition of “machinery” for purposes of the exemption. The Department did not dispute the contention that the foundations could be considered adjuncts or attachments. They maintained that the foundations aren’t “machinery” because they don’t satisfy the initial phrase of the “machinery” definition which begins “all tangible personal property…” The foundation materials qualify as real property because they had been buried or embedded. At the time that the manufacturing equipment was bolted to the foundations, the foundations had already become real property. The manufacturing equipment itself qualifies as exempt manufacturing machinery. While it is acknowledged that the foundations are necessary for the exempt machinery to function safely and properly, the foundations still aren’t eligible for the exemption. The taxpayer went on to argue that if the foundations are real property, sales tax was not due when the materials were purchased. This argument was rejected. The materials were personal property when they were purchased and thus subject to sales tax. When the materials were buried and embedded, they were converted into real property at that time. (Sinclair Oil Corporation v. Wyoming Department of Revenue, Wyoming Supreme Court, No. S-09-0231, August 26, 2010)

Posted on April 19, 2011