NJ Use Tax - Equipment Used in the Mfg. Process

[chuck917]

Happy New Year Everyone, from NJ Practitioner!

Question whether the Use Tax exemption under N.J.S.A. 54:32B-8.13(a) / N.J.A.C.18:24-4.4. (Manufactures) applies where a company is preparing Firewood for sale to the public in NJ, where such product is exempt from NJ-ST due to its Energy / Fueling nature.

Only the packaging and delivery costs of Firewood are subject to NJ ST.

My client purchased a significant amount of Equipment for this process and didn't pay ST my concern is whether Use Tax will apply. 

Any thoughts / direction would be appreciated.

Not that I’m any expert bit it seems like N.J.S.A. 54:32B-8.13(a) “Production is limited to those operations commencing with the introduction of raw materials into a systematic series of manufacturing, processing, assembling, or refining operations, and ceases when the product is in the form in which it will be sold to the ultimate consumer…” N.J.A.C.18:24-4.4. To me, this should apply to just about all the items we purchased.

Absolutely, thanks for the research, I’m familiar with this section, the area of concern is the final product (Firewood) which is exempt from ST (but for delivery), so at the end of the day the State receives no ST on the Equipment purchases nor the sale of finished product to customers, I believe they would challenge this, however I’m open to discussion and getting a 3rd party opinion here !

[GodFather]

Have you reached out to the State of NJ?  Providing the statute you cited in the post along with your thoughts?  See how they reply to that?  It would seem their direction would provide some solid basis for the decision you go with.