Form 18518 - The Tax Commission Of The State Of Idaho (Page 3 of 5) in pdf

Form 18518 - The Tax Commission Of The State Of Idaho Page 3

manufacturer to produce goods that the manufacturer will sell.

Subsection 63-3622D(f) provides a list of items that do not qualify for the production

exemption “without regard to the use” of the item. Included in this list are motor vehicles and

property used in transportation activities.

The taxpayer argues that the fuel in question is not used in transportation and that is the

reason the taxpayer is allowed an exemption from fuels tax. The taxpayer further argues that the tax

is not being imposed on the use of a motor vehicle but on the use of fuel.

The Commission does not find the taxpayer’s argument persuasive. Idaho Sales Tax Rule

079.05 (IDAPA 35.01.02.079) provides a list of examples of items that do not qualify for the

production exemption including licensed motor vehicles, repair parts for equipment that does not

qualify for the exemption, and fuel consumed during activities that do not qualify for the exemption.

The fuel used in this case is part of the vehicle itself, as much as repair parts, tires, even motor oil

and other lubricants used to maintain the vehicle. It would be a logical extension of the taxpayer’s

argument to conclude that part of the purchase price of these items would also be exempt from use

tax. There is, however, no provision in the Sales Tax Act for apportioning such purchases.

The Commission concedes that a large portion of the production process takes place in the

vehicle while it is on the way to and at the job site. The truck itself could be classified as

manufacturing equipment. The statute, however, specifically removes motor vehicles from the

ambit of the exemption. The fuel used to power the truck cannot be distinguished from the fuel used

to turn the mixing drum. Since the purchase of the truck is taxable, without regard to its use, the

purchase of the fuel used to power the truck is also taxable.

In addition to the concrete trucks, the taxpayer operates a “bulker” truck that picks up cement

DECISION - 3

[Redacted]

Form 18518 - The Tax Commission Of The State Of Idaho Page 3