Tax 11.39 NoteNote: The interpretations in s. Tax 11.39 are effective under the general sales and use tax law on and after September 1, 1969 except that (a) The change of the term “gross receipts” to “sales price” and the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., and certain leased property affixed to real property under s. 77.52 (1) (c), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2. Tax 11.39 HistoryHistory: Cr. Register, November, 1977, No. 263, eff. 12-1-77; am. (3) (j), (4) (c) and (r) 13., cr. (3) (om), Register, June, 1983, No. 330, eff. 7-1-83; am. (1), (3) (f), cr. (3) (ze), (zf) and (zg), r. (4) (p), (q) and (r) 10., Register, September, 1984, No. 345, eff. 10-1-84; am. (3) (f), Register, July, 1987, No. 379, eff. 8-1-87; correction in (4) (m) made under s. 13.93 (2m) (b) 5., Register, April, 1994, No. 460; correction in (2) (a) made under s. 13.93 (2m) (b) 5., Stats., Register, October, 1995, No. 478; am. (2) (a), (3) (m), (ze), (zf), (4) (intro.), cr. (3) (fr), (jd), (jr), (oc), (os), (wd), (wr), r. (4) (a), (d), (r), 2. and 4., renum. (4) (b), (c), (e), (f), (g), (h), (i), (j), (k), (L), (m), (n), (o) and (r) to be (4) (a), (b), (c), (d), (e), (f), (g), (h), (i), (j), (k), (L), (m) and (n) and am. (4) (a) and (k), Register, October, 1997, No. 502, eff. 11-1-97; EmR0924: emerg. r. and recr. (1) and (2), am. (4) (intro.) and (a), r. (4) (h) and (i), renum. (4) (j) to (n) to be (4) (h) to (L), eff. 10-1-09; CR 09-090: r. and recr. (1) and (2), am. (4) (intro.) and (a), r. (4) (h) and (i), renum. (4) (j) to (n) to be (4) (h) to (L) Register May 2010 No. 653, eff. 6-1-10; CR 14-006: am. (1) (b) Register August 2014 No. 704, eff. 9-1-14.; CR 20-018: r. (4) (b) Register July 2021 No. 787, eff. 8-1-21. Tax 11.40Tax 11.40 Exemption of machines and processing equipment. Tax 11.40(1)(a)(a) Section 77.54 (6) (am) 1., Stats., exempts the sales price from the sale of and the storage, use or other consumption of machines and specific processing equipment and repair parts or replacements thereof, exclusively and directly used by a manufacturer in manufacturing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., and safety attachments for those machines and equipment. “Exclusively,” as used in s. 77.54 (6) (am) 1., Stats., and in this section, means that the machines and specific processing equipment and repair parts or replacements thereof are used solely by a manufacturer in manufacturing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., to the exclusion of all other uses, except that the sales and use tax exemption will not be invalidated by an infrequent and sporadic use other than in manufacturing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats. This exemption is to be strictly construed. Tax 11.40(1)(b)(b) Section 77.51 (7h) (a), Stats., provides that manufacturing means the production by machinery of a new article of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., with a different form, use, and name from existing materials by a process popularly regarded as manufacturing, and that begins with conveying raw materials and supplies from plant inventory to the place where work is performed in the same plant and ends with conveying finished units of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., to the point of first storage in the same plant. Tax 11.40(1)(d)(d) Section 77.54 (5) (d), Stats., provides an exemption for mobile mixing and processing units and the motor vehicle or trailer on which they are mounted, including accessories, attachments, parts, supplies and materials for those vehicles, trailers and units. Tax 11.40(1)(e)(e) Section 77.54 (5) (c) and (26m), Stats., provide exemptions for certain motor vehicles, machinery and equipment used in waste reduction and recycling processes. Tax 11.40 NoteNote: See s. Tax 11.11 for more information on waste reduction and recycling exemptions. Tax 11.40(2)(2) Conditions for exemption and examples. The exemption under sub. (1) (a) shall apply if all the following conditions are met: Tax 11.40(2)(a)(a) Machines and processing equipment shall be used by a manufacturer in manufacturing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats. The exemption shall not apply to machines and processing equipment used in providing services or in other nonmanufacturing activities. Tax 11.40 NoteExample: Machines and equipment of a dry cleaner are not used by a manufacturer in manufacturing, because a dry cleaner provides a service and is neither a manufacturer nor producer of tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats. Tax 11.40(2)(b)(b) Machines and processing equipment shall be used exclusively in manufacturing. Tax 11.40 NoteExample: A forklift truck used on a production line to move products from machine to machine and used regularly or frequently in a warehouse to move and stock finished products is not used exclusively in manufacturing.
Tax 11.40(2)(c)(c) Machines and processing equipment shall be used directly in manufacturing. The exemption shall not apply if machines and processing equipment are not used directly in the step-by-step processes by which an end product results, even though the machine and equipment are indirectly related to the step-by-step processes. Machine foundations are real property improvements rather than personal property and do not qualify for exemption. Tax 11.40 NoteExample: Machines and equipment are not used directly in manufacturing if used for sweeping a plant; disposing of scrap or waste; plant heating or air conditioning; communications; lighting, safety, fire protection or prevention; research; storage; or delivery to or from a plant or repair or maintenance of machines, processing equipment or facilities. In addition, electric substations, tool storage facilities, water softening equipment, refrigerated storage facilities and catwalks that provide access to various parts of a building are not used directly in manufacturing.
Tax 11.40(3)(3) Other examples of the exemption. Other examples of application of the exemption are as follows: Tax 11.40(3)(a)(a) Small tools used exclusively and directly in the manufacturing process qualify as “processing equipment.” Small tools include hand tools such as drills, saws, micrometers and hammers. However, if the items are also used for machine repair or general maintenance, they are not exempt. Tax 11.40(3)(b)(b) The exemption applies if machines and processing equipment are used exclusively and directly by a manufacturer to produce other machines or processing equipment which, in turn, are used by the manufacturer to produce tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats. Tax 11.40 NoteExample: A lathe purchased by a manufacturer and used directly and exclusively to produce machines which are used on the manufacturer’s production line is exempt. However, if the lathe is used partly for production of the machines and partly for repair purposes, it is not exempt.
Tax 11.40(3)(c)(c) The exemption applies if machines and processing equipment are used exclusively and directly by a manufacturer to produce component parts of tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats. Tax 11.40(3)(d)(d) The exemption does not apply to machines or processing equipment used in whole or in part by a manufacturer before the manufacturing process has begun or after it has been completed. Tax 11.40 NoteExample: Machines or equipment used for storage, delivery to or from a plant, repair or maintenance of facilities or equipment, research, or crating or packaging of tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., for shipment are not exempt. Tax 11.40(3)(e)(e) The exemption does not apply to tangible personal property or an item, property, or good under s. 77.52 (1) (b), (c), or (d), Stats., which is not machinery or equipment, but is used in a manufacturing plant. Tax 11.40 NoteExample: Sweeping compounds are factory supplies rather than processing equipment.
Tax 11.40(4)(4) Repair of exempt machinery and processing equipment. The sales price from the sale of and the storage, use or other consumption of repair or replacement parts and from repair service for exempt machines and processing equipment is exempt. Tax 11.40 NoteExample: Conveyor belts, grinding wheels, grinding balls, machine drills, auger bits, milling cutters, emery wheels, jigs, saw blades, machine tool holders, reamers, dies, molds and patterns used as replacement parts for exempt machines and processing equipment are exempt.
Tax 11.40 NoteNote: The interpretations in s. Tax 11.40 are effective under the general sales and use tax law on and after September 1, 1969, except: (a) Mobile mixing units are exempt effective September 1, 1983, pursuant to 1983 Wis. Act 27; (b) Vehicles and machines used in waste reduction and recycling are exempt effective July 1, 1984, pursuant to 1983 Wis. Act 426; (c) Motor vehicles or trailers upon which mobile mixing units are mounted are exempt effective July 20, 1985, pursuant to 1985 Wis. Act. 29; (d) Safety attachments became exempt effective June 1, 1986, pursuant to 1985 Wis. Act 149; (e) The exemption in s. 77.54 (6) (am), Stats., shall be strictly construed effective October 1, 1989, pursuant to 1989 Wis. Act 31; (f) The definition of “manufacturing” and what is included in the scope of manufacturing is effective October 1, 2009, pursuant to 2009 Wis. Act 28; and (g) The change of the term “gross receipts” to “sales price” and the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., certain leased property affixed to real property under s. 77.52 (1) (c), Stats., and digital goods under s. 77.52 (1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2. Tax 11.40 HistoryHistory: Cr. Register, November, 1977, No. 263, eff. 12-1-77; am. (4) (e), Register, October, 1979, No. 286, eff. 11-1-79; am. (1) (a), (2) (b), (3) (a) to (c), Register, November, 1981, No. 311, eff. 12-1-81; am. (1) (a), Register, June, 1990, No. 414, eff. 7-1-90; am. (1) (a) and (c), (2), (3) (a), (b), (d), and (4), cr. (1) (d) and (e), Register, March, 1991, No. 423, eff. 4-1-91; reprinted to restore dropped copy in (1) (a), Register, April, 1994, No. 460; EmR0924: emerg. am. (1) (a) to (c), (2) (a), (3) (b), (c), (e) and (4), eff. 10-1-09; CR 09-090: am. (1) (a) to (c), (2) (a), (3) (b), (c), (e) and (4) Register May 2010 No. 653, eff. 6-1-10; correction in (1) (c) made under s. 13.92 (4) (b) 7., Stats., Register May 2010 No. 653; CR 10-094: am. (4) Register November 2010 No. 659, eff. 12-1-10; corrections in (1) (a), (c) made under s. 13.92 (4) (b) 7., Stats., Register August 2014 No. 704. Tax 11.41Tax 11.41 Exemption of property and items consumed or destroyed in manufacturing. Tax 11.41(1)(a)(a) Tangible personal property and items under s. 77.52 (1) (b), Stats., that are used exclusively and directly by a manufacturer in manufacturing an article of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., that is destined for sale and that becomes an ingredient or component part of the article of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., destined for sale or is consumed or destroyed or loses its identity in manufacturing the article of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., destined for sale is exempt from Wisconsin sales or use tax under s. 77.54 (2), Stats., except as provided in s. 77.54 (30) (a) 6., Stats. Tax 11.41(1)(b)(b) Manufacturing is defined in s. 77.51 (7h), Stats., to mean the production by machinery of a new article of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., with a different form, use, and name from existing materials, by a process popularly regarded as manufacturing, and that begins with conveying raw materials and supplies from plant inventory to the place where work is performed in the same plant and ends with conveying finished units of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., to the point of first storage in the same plant. Tax 11.41(2)(a)(a) The following property and items are within the exemption provided by s. 77.54 (2), Stats., if the property or item is used exclusively and directly by a manufacturer in manufacturing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., destined for sale and is consumed, destroyed, or loses its identity in manufacturing the property or item that is destined for sale: Tax 11.41(2)(a)4.4. Cleaning compounds and solvents for maintaining exempt manufacturing machinery whether used while the machinery is operating or while the machinery is idle. Tax 11.41(2)(a)15.15. Gloves and other wearing apparel, including hair nets, beard nets and facemasks used by employees working on the production line to prevent contamination of the product while it is being manufactured. Tax 11.41 NoteExamples: 1) Employees of Manufacturer A wear gloves and aprons while grading, weighing, and slicing meat products within the scope of manufacturing as defined in s. Tax 11.39 (2). The gloves and aprons are used only in this manner and prevent the meat products being manufactured from being contaminated. The gloves and aprons worn by the employees to protect the meat products from contamination are used directly in manufacturing and qualify for exemption from Wisconsin sales and use tax under s. 77.54 (2), Stats. Tax 11.41 Note2) Employees of Manufacturer B wear gloves and aprons while they are working on the production line. The gloves and aprons are used only in this manner. The gloves and aprons are worn to protect the employees’ clothing rather than to prevent contamination of the product while it is being manufactured. Although the gloves and aprons are used exclusively in manufacturing, the gloves and aprons are not used directly in manufacturing and do not qualify for exemption from Wisconsin sales and use tax under s. 77.54 (2), Stats. Tax 11.41(2)(b)(b) Tangible personal property and items under s. 77.52 (1) (b), Stats., used exclusively and directly by a manufacturer and which become an ingredient or component part of tangible personal property or an item or property under s. 77.52 (1) (b) or (c), Stats., destined for sale as tangible personal property or an item or property under s. 77.52 (1) (b) or (c), Stats., is exempt from Wisconsin sales or use tax. Tax 11.41 NoteExamples: 1) Property and items sold to an automobile repair shop or other repair business to repair a customer’s product does not qualify for exemption under s. 77.54 (2), Stats., because the property or items are not used exclusively and directly by a manufacturer in manufacturing. Tax 11.41 Note2) A manufacturer-contractor is not entitled to the exemption when purchasing tangible personal property or items under s. 77.52 (1) (b), Stats., consumed, destroyed or losing its identity in manufacturing building components which it, as a contractor, will affix to real property in a real property construction activity, because the item or property is not sold by the manufacturer-contractor as tangible personal property or an item or property under s. 77.52 (1) (b) or (c), Stats. Tax 11.41(3)(a)(a) An exemption under sub. (1) (a) is not allowed for property or items consumed or destroyed or losing their identity in manufacturing if any of the following apply: Tax 11.41(3)(a)1.1. The activity is not manufacturing or is not within the scope of manufacturing. Tax 11.41(3)(a)2.2. The property or item manufactured is not destined for sale as tangible personal property or an item or property under s. 77.52 (1) (b) or (c), Stats. Tax 11.41(3)(a)3.3. The property or item is not used exclusively and directly by a manufacturer in manufacturing. Tax 11.41(3)(b)(b) The following property and items are not within the exemption provided by s. 77.54 (2), Stats., although the property or item may be exempt under s. 77.54 (6) (am) 1., Stats., if the property or item is a machine or specific processing equipment, or a part for that machine or equipment, used exclusively and directly in manufacturing, as described in s. Tax 11.40: Tax 11.41(3)(b)7.7. Hand tools, including files, wrenches, hammers, saws, screwdrivers, planes, punches, chisels, and spray guns. Tax 11.41(3)(b)8.8. Wearing apparel for the comfort or welfare of the employee or for the protection of the employee’s clothing, such as helmets, hard hats, work gloves, aprons, coveralls, pants, coats, and fur-lined boots and jackets. Tax 11.41 NoteExample: Employees of Manufacturer C wear hard hats, as required by federal regulations, while working within the scope of manufacturing as defined in s. Tax 11.39 (2). The hard hats are worn to protect the employees. The hard hats are not used directly in manufacturing and do not qualify for exemption from Wisconsin sales and use tax under s. 77.54 (2), Stats. Tax 11.41(3)(b)9.9. Chemicals and cleaning agents used to clean the room where manufacturing takes place, including walls, ceilings, floors, drains, windows, and doors, even if the cleaning is required in order to meet sanitation standards required by state and federal regulatory agencies.
