Virginia – Electricity Generation Sales and Use Tax Manufacturing Exemption

SALT Report 3320 – The Virginia Department of Taxation released Letter Ruling 14-37 on March 19, 2014.  The ruling concludes that a nonpublic company who produces electricity for resale was eligible for a manufacturing exemption.  Under Virginia Code 58.1-609.3 2 the manufacturing exemption is limited to “raw materials that are inputs to production of electricity, including fuel.”  The taxpayer’s purchase of equipment to produce electricity qualified for the manufacturing exemption because such “tangible personal property…was indispensable to the actual production of products for sale and which are used as an immediate part of such a process.”

“Because the Taxpayer in this instance is not a public service corporation but is an entity producing electricity for sale or resale, it will be entitled to such exemption.”

“Based on the foregoing and the facts presented, I find that the manufacturing exemption is applicable to the solar panels, inverters, wires and cables (through which electricity flows), and the step-up transformers.”

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Rulings of the Tax Commissioner 14-37