Technical Assistance Advisory No. 88-013 Re: Technical Assistance Advisory Relating to Sales Tax Consequences and the Activity of Manufacturing The Tax Department has received a request for a technical assistance advisory relating to the activity of manufacturing and the sales tax consequences which would apply to a manufacturer. The request for a technical assistance advisory describes operations to be carried out by a manufacturer. The company will engage in the business of manufacturing books in the State of West Virginia. The company's customers will be publishers, all or almost all of whom will have their principal place of business outside the State of West Virginia. In every instance, the publisher will resell to customers the books manufactured for the customer by the company. The company will use a large variety of manufacturing equipment and manufacturing materials as well as a variety of materials to package books for shipment. The request for a technical assistance advisory sets forth six propositions, and requests confirmation from this Office of the accuracy of each. Each proposition is set forth below, and each is immediately followed by the Tax Department response to it.PROPOSITION 1: 1. In producing books, the company will be engaged in "manufacturing" within the meaning of §

11-15-2(p), W.

Va. Code.RESPONSE TO PROPOSITION 1: We confirm the accuracy of this statement.PROPOSITION 2: 2. The sale or lease to the company of supplies and machinery will be exempt from West Virginia consumers sales tax pursuant to §

11-15-9(g), W.

Va. Code. RESPONSE TO PROPOSITION 2: The sale or lease to the company of supplies and machinery directly used or consumed in manufacturing will be exempt from the consumers sales and service tax under Section 11-15-9(g) of the West Virginia Code. The term "directly used or consumed" is defined in Section 11-15-2(n) of the West Virginia Code. Any sale or lease of supplies or machinery or any other tangible personal property or service not directly used or consumed in the manufacturing activity would be subject to the West Virginia consumers sales tax unless some other statutory exemption or exception applies to the particular transaction.PROPOSITION 3: 3. The sale to the company of the packaging materials will be exempt from West Virginia consumers sales tax pursuant to §

11-15-9(j), W.

Va. Code.RESPONSE TO PROPOSITION 3: Although packaging materials are used subsequent to the manufacturing process and therefore are not subject to the manufacturer's exemption for materials directly used in the manufacturing process under Section 11-15-9(g) of the West Virginia Code, packaging materials are nevertheless subject to the exemption set forth in Section 11-15-9(j) of the West Virginia Code for sales of property for resale in those circumstances where packaged property is sold by the manufacturer along with its packaged manufactured product. It appears that the printer would resell tangible personal property in circumstances where packaged products are purchased from the printer. We confirm the accuracy of the statement set forth in Proposition 3, given the aforesaid transaction structure.PROPOSITION 4: 4. The use by the company in West Virginia of the supplies, machinery and packaging materials will be exempt from West Virginia use tax pursuant to §

11­15A­3(a)(2).RESPONSE TO PROPOSITION 4: Section 11-15A-3(a)(2) of the West Virginia Code provides that any exemption set forth in Section 11-15-9 of the West Virginia Code which will exempt a sale of property or services from the West Virginia Consumers Sales and Service Tax will apply with equal validity to likewise exempt the use of such property or services from the West Virginia Use Tax. Because the exemption provided in Section 11-15-9(g) and Section 11-15-9(j) of the West Virginia Code would appear to apply for the sales of supplies, machinery and packaging material as described in our responses to Propositions 2 and 3, above, Section 11-15A-3(a)(2) would act to likewise exempt the use of such property from the use tax. We confirm the accuracy of the statement set forth under Proposition 4 given the conditions, limitations and restraints set forth in our Responses to Propositions 2 and 3.PROPOSITION 5: 5. In the type of transaction described the company will be manufacturing a book and selling that book for the purpose of resale.RESPONSE TO PROPOSITION 5: We confirm the accuracy of the statement set forth under Proposition 5. The manufacturer would be selling for resale. The publisher would buy the books and then resell them.PROPOSITION 6: 6. In the type of transaction described the company's sale of the book to the publisher will be exempt from West Virginia consumers sales tax pursuant to §

11-15-9(j), W.

Va. Code.RESPONSE TO PROPOSITION 6: We confirm the accuracy of the foregoing statement, given the sale for resale transaction structure. ______________________________ Michael E. Caryl State Tax Commissioner Date: December 9, 1988cc: John Melton, Deputy Tax Commissioner Office of Revenue Operations