Ohio Tax Ohio Manufacturing Rule Has It Really Been 26 Years? - - PDF document
26th Annual Tuesday & Wednesday, January 2425, 2017 Hya Regency Columbus, Columbus, Ohio Workshop A Ohio Tax Ohio Manufacturing Rule Has It Really Been 26 Years? And, Is It Still Relevant? Tuesday, January 24, 2017 1:45 p.m. to
26th Annual
Tuesday & Wednesday, January 24‐25, 2017
Hya Regency Columbus, Columbus, Ohio
Ohio Manufacturing Rule … Has It Really Been 26 Years? And, Is It Still Relevant?
Tuesday, January 24, 2017 1:45 p.m. to 2:45 p.m.
Biographical Information
Tony Long, Senior Counsel, Honda North America, Inc. 24000 Honda Parkway, Marysville, OH 43040 tony_long@hna.honda.com 937.644.6645 Practice Areas: Energy, Tax, Transactional, Credits & Incentives, Legislation, Land Use and Real Property Tony has worked at Honda since 2001. Before that Tony worked in the Ohio Department of Taxation for 13 years in the Department’s Legal Counsel Office. Currently, Tony assists business teams with projects, matters and issues in the above areas of law. Tony represents Honda before various regulatory agencies such as the PUCO, FERC, IRS and state tax
Chamber (Tax), OMA (Tax and Energy) and COST (Property and Policy). Tony has presented many times at this conference and has presented at other seminars and before other groups in both the areas of taxation and energy. Tony has also taught classes at Honda on various topics. Tony received his law degree from Toledo in 1986 and has a Bachelor of Arts degree from Mount Union College. Jeff Stonerock, Tax Director, Clarus Partners 1233 Dublin Rd., Columbus, OH 43215 jstonerock@claruspartners.com 614-832-0754 As a Director in the State and Local tax group, Jeff brings over 24 years of tax planning, incentives, audit defense, refund claims and tax compliance experience. Jeff’s primary responsibilities include: tax planning, refund claims and audit defense in State and local tax. Jeff previously worked at Honda for 17 years providing tax planning, incentives and audit defense in the Federal income, State income, sales tax, property tax and various miscellaneous taxes in both the US and Canada. Prior to this experience, Jeff has worked in the tax groups of various companies. Jeff received his bachelor degree from the Ohio State University in 1993 and is a licensed CPA from the State of Ohio. Gabriel Tomlin, Assistant Administrator – Audit Division, Ohio Department of Taxation 4485 Northland Ridge Blvd. Columbus, OH 43229 Gabriel.Tomlin@tax.state.oh.us 614.387.2044 Gabriel (Gabe) Tomlin is a graduate of The Ohio State University with a degree in Business
In 2010, he began his career with the Ohio Department of Taxation where he specialized as a sales and use tax auditor. He has extensive tax auditing experience in the manufacturing, construction, oil and gas, and retail industries. Gabe is currently an Assistant Administrator of the Audit Division. His responsibilities include managing a team of audit personnel assigned to do audits in several different tax types as well as leading the division on several process improvement plans. This will be Gabe’s third year speaking at the tax conference.
Ohio Mfg. Rule
been 27 Years!
Relevant?
Presenters: Gabe Tomlin – Ohio Department
Tax Program Assistant Administrator Tony Long – Honda North America Senior Counsel Jeff Stonerock – Clarus Partners Tax Director Email – jstonerock@claruspartners.com P – 614-832-0754
substitute for professional or legal advice. The presenter accepts no responsibility for any actions taken or not taken on the basis of the information contained in this presentation.
any tax information contained in this presentation is not intended or written to be used, and cannot be used, for the purpose of (i) avoiding tax-related penalties under the Internal Revenue Code or applicable state or local tax law provisions or (ii) promoting, marketing or recommending to another party any tax-related matters addressed herein.
Legal Disclaimer
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History
I ssues:
PPG Industries, Inc. v. Tracy, Ohio BTA Nos. 93-M-411 and 93-M-413 (Oct. 21, 1994) A manufacturer of polymer resins (organic compounds formed by chemical reactions) was entitled to a manufacturing exemption for a vacuum system that carried samples from the mixing tanks, reactors, thin tanks, and work-in-process tanks to a quality control laboratory located within the same building but off the production line was qualified for exemption as equipment used during the manufacturing period to test or check the quality of the thing being manufactured (Sec. 5739.02(R)(2)).
Solution:
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Current Audit Program
Updates regarding the Audit Division:
to review taxpayers for compliance
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Manufacturing Exemption & Definitions
Exem ption:
produce tangible personal property for sale Definitions:
testing machinery, material handling equipment, repair service, installation service and other tangible personal property used during and necessary for the manufacturing process
Equipment, Safety equipment, items to handle or store raw material or the completed product, items used in administrative, security, record-keeping or general functions
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Manufacturing Exemption & Definitions
Definitions:
manufacturing, processing, assembling, or refining a product for sale.
are changed, converted or transformed into a different state or form from which they previously existed and includes refining materials, assembling parts and preparing raw materials and parts by mixing, measuring, blending or otherwise committing such materials or parts to the manufacturing process.
which materials or components are moved through the steps whereby manufacturing occurs
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Manufacturing Exemption & Definitions
Definitions:
product is not undergoing any substantial change or alteration in it state or form.
properties or assure the quality of a material or product.
form or condition as it will be sold by the manufacturer.
from raw or contaminated materials by distillation or physical, mechanical or chemical processes.
product, but do not include packaging a product.
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Manufacturing Exemption & Definitions
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Examples
Manufacturing Begins:
is needed for the manufacturing process, it is removed from the storage tanks by piping and taken to metering equipment where it is metered.
metering equipment
wire (raw material) from a delivery truck and transport the reels of wire to a warehouse for storage. When a job is set up, the same fork-lift moves the reel of wire from the warehouse to the spring making machine. An
feeds the wire into the spring making machine.
represents the point of commitment for the manufacturing process to begin.
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Examples
Manufacturing:
Examples
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Examples
I n Process Moving:
process and before manufacturing ends.
concept.
from the machine that forms the pipe to the kiln where the pipe is cured. (Exempt from tax)
is temporarily stored to be used later to produce a completed product to be sold. The piping used to transport the feed to the storage bin and from the storage bin are in- process items and not subject to tax.
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Examples
Testing:
taxable items used to test paint. The quart jar, the ladle and storage cabinet used to store the quart jars for 5 years are taxable.
from various tanks and sends the samples to a laboratory for testing of the crude’s composition.
exempt.
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Examples
Adjuncts ( Pits) :
machinery to allow access, are taxable business fixtures
finished goods are taxable
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Examples
Consum able:
Examples
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Examples
Manufacturing Ends:
steel is sprayed with an oil to prevent rust from forming on the steel’s surface. The steel then leaves the plant via the truck dock. The spraying of the steel constitutes the end of manufacturing.
to ice cream manufacturing. The ice cream solidifies in a hardening room and then is packaged and stored in a freezer warehouse prior to shipping. The hardening room constitutes the end of the manufacturing process. Packaging begins shortly thereafter, followed by the storage of a finished good (taxable).
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Examples
Repair Services
Examples
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Examples
Pollution Control:
Examples
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Examples
Safety:
(Taxable – Example 9)
Example 7 but not as safety items but necessary for the manufacturing process)
used to protect workers; but because safety signs, safety equipment (glasses, clothing or shoes) are not attached to production equipment the items are taxable.
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Examples
I nstallation:
installation services for items described in division (B) of this section.
installation services.
equipment that is used before or after the manufacturing process, those installation services would be subject to sales tax.
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Examples
Research & Developm ent:
Examples
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Examples
R & D:
qualified research and development equipment;
capitalized tangible personal property, and leased personal property that would be capitalized if purchased, used by a person primarily to perform research and development. Tangible personal property primarily used in testing, as defined in division (A)(4) of section 5739.011 of the Revised Code, or used for recording or storing test results, is not qualified research and development equipment unless such property is primarily used by the consumer in testing the product, equipment, or manufacturing process being created, designed, or formulated by the consumer in the research and development activity or in recording or storing such test results.
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Examples
R & D:
qualified research and development equipment;
formulating new or enhanced products, equipment, or manufacturing processes, and also means conducting scientific or technological inquiry and experimentation in the physical sciences with the goal of increasing scientific knowledge which may reveal the bases for new or enhanced products, equipment, or manufacturing processes.
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Examples
R & D:
capitalized if purchased) used to perform R&D is not taxable)
taxable.
taxable.
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Questions