SALT Report 1225 – An opinion letter issued by the Kansas Department of Revenue discusses sales tax obligations regarding purchases of pallets and shrink wrap. The letter addresses a situation in which a manufacturer shrink wraps its product onto pallets and then sells the shrink-wrapped product to wholesalers and retailers who have no obligation to return the pallets or shrink wrap to the manufacturer.
And, the following items of tangible personal property are determined to be ingredients or component parts:
- Containers, labels and shipping cases used in the distribution of property produced, manufactured or compounded for sale, if such labels or containers are not to be returned to the producer, manufacturer or compounder for reuse, and
- Containers, labels, shipping cases, paper bags, drinking straws, paper plates, paper cups, twine and wrapping paper used by wholesalers and retailers in the distribution and sale of taxable property if such labels or containers are not to be returned to the wholesaler or retailer for reuse
As a result, manufacturers are entitled to claim a resale exemption when purchasing shrink wrap and pallets according to the above conditions.
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