in-20251015-IR-045250476NRA: DEPARTMENT OF STATE REVENUE

DEPARTMENT OF STATE REVENUE Revenue Ruling #2025-04-RST September 25, 2025 NOTICE:  Under IC 4-22-7-7, this document is required to be published in the Indiana Register and is effective on its date of publication. It shall remain in effect until the date it is superseded or deleted by the publication of a new document in the Indiana Register. The publication of this document will provide the general public with information about the department’s official position concerning a specific issue. ISSUES Sales and Use Tax – Imposition of Sales/Use tax Authority: IC 6-2.5-6-9 STATEMENT OF FACTS The Company is a wholly owned subsidiary of a large logistics provider. The Company offers a variety of services to its customers including supply chain analysis and design, supply chain management, in-plant services, manufacturing services, assembly and packaging, warehousing and order fulfillment, transportation and transportation management, service parts logistics, and reverse logistics. The Company operates numerous distribution centers for its customers in Indiana. Their facilities receive shipments of customer-owned products which are either stored until they are ultimately designated for shipment, or packaged shipping. The Company uses non-returnable packaging materials such as bags, boxes, bubble wrap, cardboard pads, labels, stretch wrap, tape, pallets, and crates to prepare its customer-owned products for shipment. The Company provides the following services to its Indiana customers: DISCUSSION When interpreting the Indiana General Assembly’s use of terms, the state applies the statute as written, giving all its words their plain and ordinary meaning unless the statute indicates otherwise. See, Covance Cent. Lab’y Servs. LP v. Indiana Dept of State Revenue, 204 N.E.3d at 348, 355 (Ind. Tax 2023). When a taxpayer claims, it is entitled to a tax exemption it bears the burden of proving that the terms of the exemption have been met. Indiana Dep’t. of Revenue v. Interstate Warehousing, 783 N.E.2d 248, 250 (Ind. 2003). The Department will strictly construe the exemption statutes against the taxpayer claiming the exemption. Id. Issue #1. Are the Company’s purchases of non-returnable packaging materials for use in the packaging services it provides to its customers exempt from sales tax as sales of wrapping material and containers for use in the shipping or delivery of tangible personal property pursuant to IC 6-2.5-5-9(d)? IC 6-2.5-5-9 states: (Emphasis added) The industrial processing or servicing statute (IC 6-2.5-4-1(d)) and IC 6-2.5-5-9(d) parallel each other in pertinent respects. The former states: The Department has previously issued a Letter of Findings (“LOF”) stating that IC 6-2.5-5-9(d) applies to industrial processors. See, Letter of Findings 04-20130125 (August 8, 2013). (20130828-IR-045130387NRA). The LOF dealt with a taxpayer that was an industrial processor and was for the tax years 2010 and 2011; the LOF noted that prospectively IC 6-2.5-5-9(d) would be applicable since that taxpayer was found to be an industrial processor. The Tax Court has held that a taxpayer’s purchase of labels, directories and other similar items for use in package assembling could not reasonably be assumed to transform customers’ package into a new product. See, Faris Mailing, Inc. v. Indiana Dep’t of State Revenue, 512 N.E.2d 480 (Ind. Tax Ct. 1987). The Company, like Faris Mailing, is a fulfillment company providing logistics and packaging services for its customers. It does not transform its customers’ products or create a new marketable product. The non-returnable materials used in the performance of its services such as bags, boxes, bubble wrap, cardboard pads, envelopes, labels, stretch wrap, tape, pallets, and crates, are not exempt from sales tax since the Company does not meet the requirements of IC 6-2.5-5-9(d)(2)(B). Issue #2. Are the Company’s purchases of packaging equipment used to package or repackage products for customers in Services B, C, and D, described in the Statement of Facts, exempt as manufacturing machinery, tools or equipment for direct use in direct production? Machinery, tools, and equipment purchased for direct use in production of goods are subject to sales/use tax unless the property used has an immediate effect on the goods produced and is essential to an integrated process used to produce marketable goods. See, IC 6-2.5-5-3. The statute provides that “[t]ransactions involving manufacturing machinery, tools, and equipment are exempt from the state gross retail tax if the person acquiring that property acquires it for direct use in the direct production, manufacture, fabrication, assembly, extraction, mining, processing, refining, or finishing of other tangible person property. IC 6-2.5-5-3(b). The Tax Court found in Faris Mailing that a taxpayer who packed and assembled items for mailing was not entitled to the equipment exemption. Id. The Tax Court held that merely assembling items into a package did not transform the package into a new product. See also, North Central Industries, Inc. v. Indiana Dep’t of State Revenue, 790 N.E.2d 198 (Ind. Tax Ct. 2003). The Company is engaged in packaging of its customers’ products, however; it does not transform their customers’ products into new marketable products. The Company is not engaged as an industrial processor, therefore the machinery and equipment used to package its customers’ products would not be exempt from sales tax as manufacturing equipment used directly in direct production. RULING The Company is a fulfillment company who handles the logistics of storing, packaging and shipping its customers’ products. The Company is proving assembly and packaging services. It is not an industrial processor since it does not transform its customers’ products. Therefore, the non-returnable wrapping materials as well as any machinery, and equipment used in providing it assembly and packaging services are subject to sales/use tax. CAVEAT This ruling is issued to the taxpayer requesting it on the assumption that the taxpayer’s facts and circumstances as stated herein are correct. If the facts and circumstances given are not correct, or if they change, then the taxpayer requesting this ruling may not rely on it. However, other taxpayers with substantially identical factual situations may rely on this ruling for informational purposes in preparing returns and making tax decisions. If a taxpayer relies on this ruling and the Department discovers, upon examination, that the fact situation of the taxpayer is different in any material respect from the facts and circumstances given in this ruling, then the ruling will not afford the taxpayer any protection. It should be noted that subsequent to the publication of this ruling a change in statute, regulation, or case law could void the ruling. If this occurs, the ruling will not afford the taxpayer any protection. Sincerely, Indiana Department of Revenue Replaces Ruling Document: New