DRS: Ruling 89-3, Manufacturing

 

STATE OF CONNECTICUT
DEPARTMENT OF REVENUE SERVICES

450 Columbus Blvd
Hartford CT 06103
 
 
 
 
 
 

 
 

This Ruling has been obsoleted by AN 94(4)

Ruling 89-3

Manufacturing


You have requested a ruling as to whether the business activities of X Company constitute manufacturing.

As we understand the facts, X Company purchases old automobile and truck engines from salvage yards. X Company also purchases OEM parts from suppliers and builds new engines that are then resold.

While there is no statutory definition of "manufacturing," section 12-426-11b(a)(10) of the Regulations of Connecticut State Agencies provides that "'manufacturing' shall mean the performance as a business of an integrated series of operations which places personal property in a form, composition or character different from that in which it was acquired for sale in the regular course of business by the manufacturer. The change in form, composition, or character must be a substantial change, and it must result in a transformation of property into a different product having a distinctive name, nature and use. Operations such as compounding or fabricating are illustrative of the types of operation which may result in such a change. 'Manufacturing' is an activity which shall occur solely at an industrial plant."

Section 12-426-11b(a)(7) of the Regulations of Connecticut State Agencies in turn provides that an "'industrial plant' shall mean a manufacturing facility at which a manufacturing production process is occurring. . . ." A "manufacturing production process" is defined by these same regulations as "any one of a series of production activities, beginning with the movement of the raw materials after their receipt, inspection and storage, to the first production machine and ending with the completion of the finished product, including any packaging operations, for its sale to the ultimate consumer. . . ." Regs. Conn. State Agencies 12-426-11b(a)(11).

It is our opinion that X Company's business activities do not constitute manufacturing under the above definitions. There is no substantial change resulting in a transformation of property into a different product as a result of the process. Furthermore, X Company's operation does not place the engine in a different form, but merely rebuilds the engine with new parts.

Because the engines are resold, the parts bought for inclusion into the product for sale may be purchased on a resale certificate. However, X Company may not use a manufacturers exemption certificate to purchase machinery involved in its business operation.

 

TIMOTHY F. BANNON
COMMISSIONER

March 29, 1989