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Building materials and supplies

Building materials and supplies for special purpose

area of an addition, modification, or new building quali-

buildings, for foundations that support capital equip-

fies as a special purpose building.

ment, or used to install capital equipment, qualify for a

Foundations. Building materials used for foundations

refund as described below. To qualify, the building ma-

that are specifically designed and constructed to support

terials must be purchased by the owner. Building materi-

equipment qualify for the replacement capital equipment

als purchased by construction contractors qualify for a

refund. However, the fact that foundation materials

refund only if there is a valid purchasing agent relation-

qualify does not mean the building itself qualifies as a

ship between the owner and the contractor. (See Pur-

special purpose building. The building must meet the

chases by contractors on page 7.)

criteria outlined in this notice to qualify as a special pur-

Special purpose buildings. A special purpose building

pose building.

is a structure that because of its size or method of instal-

Installation and support. Building materials and sup-

lation is considered real property, rather than tangible

plies used to install qualifying equipment are eligible for

personal property. To be considered a special purpose

the same rate of refund as the equipment. Materials and

building, the structure must serve or perform a function

supplies used to install capital equipment qualify for a

essential to the production process, and must be used in

full refund of the sales tax paid. Materials and supplies

producing a product to be sold ultimately at retail. Pur-

used to install replacement capital equipment qualify for

chases of building materials and supplies that become

the replacement capital equipment refund rate in effect at

part of a special purpose building qualify for the re-

the time the materials are purchased.

placement capital equipment refund. Examples of spe-

cial purpose buildings include:

Nonqualifying building materials. Building materials

•

Clean-room facilities, independent flash-freeze tun-

used for the following purposes do not qualify for the

nels, or self-enclosed paint booths.

replacement capital equipment refund:

•

Research facilities such as wind tunnels or test stands

•

general purpose manufacturing, industrial, or com-

used primarily for product development or testing.

mercial buildings;

•

Tanks, bins or silos used primarily for temporary stor-

•

buildings designed to protect equipment from the

age of work in process. Facilities used to receive or

elements, to provide space cooling or heating, or to

store raw materials prior to the production process or

allow equipment to perform at optimal levels;

to store raw materials on the production floor do not

•

buildings that are modified to allow for the installa-

qualify as special purpose buildings.

tion of an assembly line or conveyance system when

such modifications do not affect the product; or

Building materials qualify for the replacement capital

•

buildings that are only modified by incorporating

equipment refund if at least 67 percent of the total floor

special foundations to support qualifying equipment.

buildings and qualify for the replacement capital equip-

Example 1. A 10,000 square foot addition for a clean

ment refund. The silos used to hold raw materials do not

room is added to an existing production facility. About

qualify since they are used for storage before the begin-

2,000 square feet of the addition is used for an office and

ning of the production process.

restrooms. The building materials to construct the entire

addition qualify for the replacement capital equipment

Example 4. A manufacturer builds a new facility in Minne-

refund, since at least 67 percent of the total floor area of

sota. Materials and supplies used to install the equipment

the addition qualifies as a special purpose building.

and to build necessary support structures for the capital

Example 2. An asphalt mixing plant builds a new facility

equipment qualify for the capital equipment refund. The

building foundation needs to be reinforced to support the

in Minnesota. A roof is built over the mixing plant equip-

weight of the manufacturing equipment. Therefore, mate-

ment to protect it from the elements. The roof is not a

rials and supplies used to build the foundation necessary

special purpose building since it has no direct effect on

to support the equipment qualify for the replacement

the product being produced.

capital equipment refund. Other building materials used to

Example 3. A brewery builds a new plant in Minnesota.

construct the facility don’t qualify for a capital equipment or

Large silos are needed for storage of the raw hops and

replacement capital equipment refund.

barley and other silos are used to maintain constant

To qualify as capital equipment, the item must be used

temperatures of work in process during fermentation.

The silos used for fermentation are special purpose

by the purchaser or lessee. If a manufacturer buys

Capital Equipment, Replacement Capital Equipment Sales Tax Fact Sheet 103 - Minnesota Department Of Revenue Page 6

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