United States

Indiana: Manufacturing Exemption Extends to Soft Drink Machine Parts

Jul 10, 2017
From KPMG TaxWatch

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In a recent Letter of Findings, the Indiana Department of Revenue determined that repair parts purchased for soft drink machines qualified for the state’s manufacturing exemption. The taxpayer, an Indiana business that operated several restaurants, purchased the parts and paid sales tax to the vendor. The taxpayer filed a refund request, arguing that the parts were exempt under the manufacturing equipment exemption.

Under Indiana law, equipment qualifies for the state’s manufacturing exemption if it is essential and integral to the taxpayer’s integrated production process. The exemption extends to replacement and repair parts used to replace worn, broken, inoperative, or missing parts for exempt machinery. The taxpayer claimed in its refund request that the soft drink machines combined raw materials—syrup and carbonated water—to produce a new product in the form of a soft drink. This combining of raw materials into a salable good qualified the soda machine as manufacturing equipment. Therefore, the Department agreed that the repair parts purchased for the equipment were used in an integrated production process and were exempt. For more information on this recent Letter of Findings, please contact Dave Perry at 513-763-2402.


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The following information is not intended to be "written advice concerning one or more federal tax matters" subject to the requirements of section 10.37(a)(2) of Treasury Department Circular 230.

The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.