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Virginia’s Manufacturing Exemption


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Virginia law provides an exemption from retail sales and use tax for machinery, tools and equipment, and for certain repair parts or replacements, so long as they are used primarily and directly “in processing, manufacturing, refining, mining or converting products for sale or resale.” Fuel, power, energy and supplies used directly in processing, manufacturing, refining, mining and converting products for sale or resale are also exempt from sales and use tax in the Commonwealth of Virginia.

By “used directly,” Virginia law means “those activities that are an integral part of the production of a product, including all steps of an integrated process, but not including incidental activities such as general maintenance, management, and administration.”

The exemption does not extend to items that are incidentally involved, such as “fuel storage tanks, platforms, structural steel, grating, equipment supports, special flooring, etc.” While these items may be essential components of the business, they are not “used directly” in either manufacturing or processing. This holds true even in the event “such items may be directly attached to exempt production machinery.”

It is always best to check with a source of authority when there is any question about product taxability, as a Virginia Taxpayer recently did. In Rulings of the Tax Commissioner 14-172, the Virginia Tax Commissioner explains that since the products in question are used directly (there’s that phrase again) in manufacturing, they are exempt. A properly completed exemption certificate is required.

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Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.