Tanker trailer manufacturer not entitled to sales tax refund on rehabbed tankers

A Delphi company that makes cryogenic tanker trailers as well as repairs and rehabilitates used ones could not convince the Indiana Tax Court that it should be entitled to a refund on the utilities it used to rehab used tankers.

Alloy Custom Products Inc. sought review of the denial by the Indiana Department of State Revenue of a refund of the sales tax it paid on utilities consumed while fixing the cryogenic tankers between September 2006 and March 2010. Alloy claimed it qualifies for the exemption in I.C. 6-2.5-4-5 that provides the retail sales of electricity and natural gas by a public utility to a purchaser that uses that electricity and gas in its manufacturing process are not subject to sales tax. The purchaser must be using those utilities as part of a process that produces tangible personal property.

The IDSR only refunded Alloy on the sales tax paid on utilities used to make the tanker trailers. Alloy argued that its rehabilitation process of used trailers produces tangible personal property. Both parties sought summary judgment before the Tax Court.

Senior Judge Thomas Fisher ruled in favor of the state after applying a four-question test outlined in Rotation Prods. Corp. v. Indiana Dep’t of State Revenue, 690 N.E.2d 795, 798 800-02 (Ind. Tax Ct. 1998). Those questions ask whether a product has been transformed into a new product or whether routine maintenance and repair was performed.

Fisher found that Alloy’s rehabilitation of used trailers is merely normal repair. He noted the whole point of the rehab process is to restore the bottle’s capacity to transport liquid gas. The fact that an owner may opt to take the trailer out of service does not mean, however, that the rehab process is not “routine maintenance,” as Alloy claimed. Plus, a tanker trailer can be rehabbed several times.

Fisher granted the state’s request for summary judgment and denied Alloy’s request. The case is Alloy Custom Products, Inc. v. Indiana Department of State Revenue, 49T10-1102-TA-17.