Maine Revenue Services Sales, Fuel & Special Tax Division Instructional Bulletin No. 46 Sheet (Page 5 of 8) in pdf

Casual or isolated sales of fabrication services. Sales of fabrication services

made by a person who does not engage in making such sales in the ordinary course of

repeated and successive transactions of a like character do not fall within the definition of

"retail sale" and are therefore exempt.

PURCHASES BY FABRICATORS

Machinery and equipment. The Sales and Use Tax Law provides an exemption

for purchases of machinery and equipment and repair parts for machinery and equipment

used directly and primarily in the production of tangible personal property for sale or

lease. This exemption is applicable not only when the tangible personal property being

produced is for ultimate sale or lease by the producer, but also when the tangible personal

property is being fabricated for ultimate sale or lease by another. In order to qualify for

exemption on the basis of use in the provision of fabrication services, machinery or

equipment must meet all of the following qualifications:

The property produced must be intended ultimately for sale or lease,

not for use by the owner. For example, use of printing equipment to produce

catalogs for a department store that supplies the materials is not a qualifying use,

because the catalogs are not intended for sale or lease by the store.

ii.

The property produced must be intended for sale or lease as tangible

personal property, not as real estate. For example, use of machinery to fabricate

structural steel for a contractor who will erect it is not a qualifying use because

the steel is not intended for sale or lease in the form of tangible personal property.

iii.

The machinery or equipment must be used directly in production of

tangible personal property, not in procurement or storage operations or any other

activities that are simply incidental, convenient or remote to production.

iv.

The machinery or equipment must be used primarily (more than

50% of the time) in production that meets all of the above qualifications, or in

production of tangible personal property intended ultimately for sale or lease by

the producer.

Machinery or equipment used 50% or more of the time in

fabricating tangible personal property that will not be sold or leased is subject to

tax.

Ingredient or component part. Items that will be physically incorporated in

tangible personal property and actually pass to the purchaser of fabrication services as an

ingredient or component part of tangible personal property may be purchased tax-free by

the fabricator since they are effectively being purchased for resale, whether the property

is intended ultimately for sale or lease or for use by the customer. Some examples of

purchases which would be exempt are staples used by a printer to assemble catalogs;

nails and glue used by a cabinetmaker to assemble cabinetry; and sheet metal screws used

by a sheet metal shop to fabricate ductwork.

Maine Revenue Services Sales, Fuel & Special Tax Division Instructional Bulletin No. 46 Sheet Page 5