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Definition of terms

(as they relate to capital equipment and replacement capital equipment)

Accessories cannot function inde-

Fabricating is making or assembling

Pollution control equipment is

pendently, and they must be at-

components to work in a new or dif-

equipment used to eliminate, prevent,

tached, connected or fastened to a

ferent manner.

or reduce pollution resulting from

piece of equipment in order to func-

production activities.

Foundation means the base or

tion. Accessories include feeders,

support structure necessary for

Primarily means that the equipment

tools, jigs, patterns, dies and molds.

qualifying equipment. It does not in-

must be used 50 percent or more of

Accessories also include devices that

clude the foundation for a building

its operating time in a qualifying ac-

upgrade, modernize or modify the

unless the building is a special pur-

tivity.

capabilities of the underlying equip-

pose building.

ment. Accessories added after the

Product, for purposes of this fact

main equipment was placed into pro-

Manufacturing is changing the form,

sheet, means tangible personal prop-

duction qualify only as replacement

composition, or condition of raw

erty, electricity and steam.

capital equipment.

materials into a new product. For

Refining means converting natural

purposes of the capital equipment

Attachments are capable of func-

resources to a product; purifying

refund, manufacturing includes gen-

tioning independently from the equip-

materials such as oil, metal, sugar,

erating electricity or steam for sale at

ment to which they are attached.

and fats; and treating of water to be

retail. Manufacturing includes con-

Examples of attachments are con-

sold at retail.

verting an unusable item into a useful

veyors and pick and place machines.

item through rebuilding or recon-

Repair or replacement parts are

Equipment and machinery are

struction for sale at retail. Manufac-

items used to restore equipment to its

mechanical, electronic, or electrical

turing does not include repair or re-

original or intended operating condition,

devices, tools or hand tools used to

furbishing items returned to the origi-

including parts that upgrade or mod-

manufacture, fabricate, mine or re-

nal owner.

ernize equipment, as well as spare

fine a product for sale at retail. This

parts.

Materials and supplies are items

includes computers and software

necessary to construct or install

used in operating qualifying equip-

Sold ultimately at retail means that

qualifying capital equipment, such as

ment, as well as any subunit or as-

the product being produced must be

nails, bolts, screws, pipes, lumber,

sembly of the equipment. Devices

intended for sale at retail. This does

and wire used to secure or assemble

necessary to control, regulate, or

not mean that the producer must

the equipment in the facility.

operate the production equipment

make the retail sale, or that the prod-

are also included.

uct be subject to sales tax. For ex-

Mining is extracting ore, minerals, or

ample, equipment used in producing

peat from the earth. It includes under-

Essential means that the equipment

a product for sale at wholesale, and

ground, surface, and open-pit mining

must perform a necessary or indis-

equipment used for producing non-

operations. It also includes any sur-

pensable step in the production pro-

taxable products such as clothing

face mining to obtain building stone,

cess. The fact that a particular piece

qualify as capital equipment.

limestone, gravel, sand, or other sur-

of equipment is required by law or is

face materials.

a practical necessity does not make

it essential to the production process.

References

96-15 What Activities Qualify

MN Statute 297A.01, Subds. 16 &

Fact Sheets:

96-17 Determination of Capital

100, Agricultural Production

Equipment vs. Replacement

Revenue Notices:

109, Printing Industry

Capital Equipment

96-08 Construction Contractor as

129, Utilities Used in Production

97-04 Special Purpose Buildings

133, Advertising-Creative Promo-

Purchasing Agent

97-05 Integrated Production Process

tional Services

96-10 Lease Renewal or Buyout

for Tangible Personal Property

145, Industrial Production

96-12 Attachment Equipment vs.

98-03 On-Line Data Retrieval for

146, Use Tax for Businesses

Accessories

Capital Equipment

96-13 Used by the Purchaser

96-14 Research, Development, and

Design

Capital Equipment, Replacement Capital Equipment Sales Tax Fact Sheet 103 - Minnesota Department Of Revenue Page 2

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