Avoid paying sales tax on manufacturing equipment in Ohio

 

A colleague of mine was working with a local manufacturer to help them tax advantage of the part of Ohio’s take law that exempts manufacturing equipment from sales tax (both county and state).  He had looked up the program online at the Ohio Department of Development, where it reads:

• Program Description – “Manufacturing Machinery & Equipment Sales Tax Exemption – Provides an exemption from state and county sales tax for companies that purchase machinery and equipment for manufacturing activities.  Vendor needs a blanket exemption certificate, available on-line at the Department of Taxation’s website (http://tax.ohio.gov) under Business, Tax Forms 
• Rate/Terms – Exempts business from entire state and county sales tax for purchases of machinery and equipment used primarily for manufacturing.  
• Benefits – Provides significant tax savings for companies and individuals that are involved in manufacturing in Ohio  
• Eligibility – Includes machinery, equipment, supplies and fuel used primarily in a manufacturing operation to produce tangible personal property for sales
• Contact – Ohio Department of Taxation, Sales Tax Division (614) 466-7351 or (888) 405-4039

The Questions

The question the colleague had was how all of this needed to happen specifically.  Does the certificate need to be approved by someone before the exemption is granted?  Who fills it out?  Etc.  I had never done one, so I called around and talked to Janelle in the Zanesville office of the Ohio Dept. of Taxation, and she was very helpful.  You can call her at 888.405.4039.  Ask for agent 2750/Janelle. 

The Answers

The process is simple.  The manufacturer is the one who has to fill out the certificate (STEC B – pdf, Word).  Then, when they are purchasing the equipment, they give it to the vendor, who puts it in their files and does not charge the tax.  When manufacturers fill the form out, they should put “will be used directly in manufacturing” as the reason.

Extra credit – what all is covered

The law relating to the exemption covers much more than just production equipment.  It also covers the following:

• material handling equipment that moves product through the manufacturing process
• transport equipment (not incl. cars on highways)
• catalysts, solvents, water, acids, oil, etc. that interact w/product + are part of mfg. process
• equipment that supports, controls, lubricates, or powers production equipment
• machinery + equipment used to make machinery + equipment, fuel, etc. for manufacturing
• scrap storage or handling equipment, when scrap to be reused
• test equipment for raw materials, works in progress, and finished product
• coke, gas, water, steam, etc. used in mfg. operation
• machinery that treats, filters, pumps, etc. material for use in manufacturing
• machinery + equipment and fuel used to produce electricity for manufacturing
• transport or transmission machinery + equip for electricity, coke, gas, water, steam (w/parameters)
• machinery + equipment that treats, filters, cools, refines, renders water, steam, acid, oil, solvents for reuse
• parts, components, installation + repair of equipment covered
• machinery + equipment, detergents, solvents, supplies, etc. used for cleaning towels, linens, clothing, mats…
• equipment + supplies used to clean dairy processing equipment

>> Ohio Department of Development (ODOD)

>> ODOD Tax Credits & Exemptions

>> Ohio Tax Forms

>> Find the form in both Adobe PDF and Microsoft Word here – pdf, Word

>> Read the law (ORC 5739.011)