Alabama – Fuel Oil Used to Operate Tire Curing Presses Not Exempt

SALT Report 1352 – The Alabama Administrative Law Division upheld an assessment by the ADOR against a taxpayer who manufactures tires at three facilities in Alabama.  The Taxpayer used what is commonly referred to as a curing press to manufacture their tires.  The taxpayer uses boilers to produce steam that is needed to operate the curing presses.  The curing presses are then used to shape and cure “green” tires into finished, ready to use tires.

The steam boilers used by the Taxpayer also provide heat for other uses in the Taxpayer’s facilities. The steam used for the curing presses is separately metered from the steam used for all other purposes. The Taxpayer calculates the amount of fuel oil it burns to create the steam used in the curing presses and contends that that portion of the fuel oil should be exempt from sales and use tax.

The issue in this case is whether the fuel oil used to power the boilers was exempt under Alabama Code §40-23-4(a)(14) which provides a sales tax exemption for “fuel oil used in kilns in manufacturing establishments in Alabama.”  The taxpayer contends that the curing presses used in the tire manufacturing process are kilns.

The ALD determined that the word “kiln” has not yet been defined by statute; therefore the term had to be given its simple, ordinary meaning.  Using several dictionary definitions the ALD ruled that a kiln is generally recognized as “an enclosure or chamber such as an oven or furnace, in which various materials such as grains, ceramics, bricks, or lumber, were dried through the application of heat.”

While the taxpayer was correct that the curing presses used in his facility had characteristics in common with a kiln, there was no evidence that a tire curing press was, or ever had been, recognized or referred to as a kiln. Consequently, the fuel oil burned to create the steam used in the curing presses was not exempt from sales or use tax.  A judgment was entered against the Taxpayer for State sales tax and interest of $31,570.74, $2,071.72, and $27,336.19; and State use tax and interest of $2,071.72, $27,106.44, and $31,570.74.

For Further Information:

Michelin North America, Inc. v. Alabama Department of Revenue – No. S. 10-794