Iowa State Manufacturing Exemptions
Machinery, Equipment, and Computer Exemption
Sales, leases, or rentals of the following are exempt from tax:
a. Machinery, equipment, and computers directly and primarily used in processing by a manufacturer.
b. Machinery, equipment, and computers directly and primarily used to maintain a manufactured product’s integrity or to maintain any unique environmental conditions required for the product.
c. Machinery, equipment and computers directly and primarily used to maintain unique environmental conditions required for other machinery, equipment, or computers used in processing by a manufacturer.
d. Test equipment directly and primarily used by a manufacturer in processing to control the quality and specifications of a product.
e. Machinery, equipment, or computers directly and primarily used in research and development of new products or processes of processing.
f. Computers used in processing or storage of data or information by an insurance company, financial institution, or commercial enterprise.
g. Machinery, equipment, and computers directly and primarily used in recycling or reprocessing of waste products.
h. Pollution control equipment used by a manufacturer. It is not necessary that the equipment be “directly and primarily” used in any kind of processing.
i. Materials used to construct or self-construct any machinery, equipment, or computer, the sale of which is exempted by paragraphs “a” through “h” above.
j. Exempt sales of fuel and electricity. Sales of fuel or electricity consumed by machinery, equipment, or computers used in any exempt manner described in paragraphs “a,” “b,” “c,” “d,” “e,” “g,” and “h” of this subrule are exempt from tax. Sales of electricity consumed by computers used in the manner described in paragraph “f” remain subject to tax.
A manufacturer is any person, firm, or corporation who purchases, receives, or holds personal property for the purpose of adding to its value by any process of manufacturing, refining, purifying, combining of different materials, or packing of meats with an intent to sell at a gain or profit
A contract manufacturer is considered to be a manufacturer. A contract manufacturer is a manufacturer that processes tangible personal property on the behalf of other manufacturers. A contract manufacturer does not sell the tangible personal property it processes on the behalf of another manufacturer.
Examples of Businesses that Qualify as Manufacturers:
• newspaper publishers
• contract manufacturers
• those engaged in quarrying or mining; see below
• producers of drugs or agricultural supplies
• lumber millers
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