The Industrial Processing Exemption is applicable to a Conveyor System used to move Raw Material to the First Step in Industrial Processing
In a case that I handled at audit and at the informal conference, Rouge Steel Company v. Department of Treasury, (Rouge Steel) Michigan Tax Tribunal, No. 315388, November 30, 2009, released April 2010, a conveyor system used by Rouge Steel, a steel manufacturer, qualified for the industrial processing exemption from Michigan use tax because the exemption applies to production material handling. The very expensive and complicated conveyor system moved the raw material, iron ore pellets, from the in-ground storage to the first step in industrial processing where coke and other materials were added prior to movement to the blast furnace. The key issue in this case was: at what point does the industrial processing exemption start?
Though the industrial processing statute during the audit period was ambiguous, it was subsequently amended to clarify that production material handling falls within the definition of industrial processing. Further, a rule promulgated by the Department of Treasury (RAB 2000-4) prior to the audit period had specifically cited production material handling as an example of an industrial processing activity. Once the transportation of raw materials was set in motion by the initial movement of the pellets from storage onto the hopper conveyors, the process of moving the pellets to the blast furnaces was continuous and part of the industrial process.
Sales and Use Tax Seminars
I will be leading a discussion of the Industrial Processing Exemption as well as other relevant sales and use tax issues at a series of seminars sponsored by the Michigan Association of certified Public Accountants (MACPA).
Tuesday, May 25, 2010 - Troy
Wednesday, June 2, 2010 - Grand Rapids
Wednesday, September 29, 2010 - Grand Rapids
Thursday, October 7, 2010 - Livonia
Industry Specific Seminars
Construction Industry: On Friday, October 8, 2010 in Troy, Dave Barrons and I will be presenting a seminar titled: Michigan State and Local Tax for a Contractor. Along with coverage of the Michigan Business Tax, the seminar will cover the very complicated sales and use tax issues that construction contractors face.
Manufacturing Industry: On Wednesday, October 20, 2010 in Plymouth, Mike Lewakowski and I will be presenting a seminar titled: Michigan State and Local Tax for a Manufacturer. In addition to coverage of the Michigan Business Tax, the seminar will devote a substantial amount of time to the industrial processing exemption.