Virginia Regulatory Town Hall
Department of Taxation
Department of Taxation
Retail Sales and Use Tax [23 VAC 10 ‑ 210]
Action Manufacturing and Processing
Comment Period Ended on 7/11/2007


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7/6/07  12:58 pm
Commenter: Tim Winks

Quality Control

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There appears to be inconsistency in rulings as to when items are deemed used directly in production line testing and quality control.  For example, some rulings suggest that quality control requires that the in-process product be acted upon in order for the exemption to apply, while others exempt items (such as HVAC equipment) that do not come directly into contact with products but which are still essential to the ultimate integrity of the product.  The regulation should clarify that quality control is broader than activities that come into direct contact with the product and should provide specific examples of exempt quality control property, such as cleanrooms used in the semiconductor, pharmaceutical, and electronics industries; specialized internal structures and HVAC systems necessary to maintain climate control for product integrity purposes; etc.

The regulation should also discuss pre-production quality control activities (as opposed to routine maintenance) that have been recognized as being exempt in various rulings, e.g., cleaning molds before each production run to prevent color run-off into the next production cycle.

The Department should also reconsider as quality control activities occuring prior to production runs that in the past may have been miscategorized as "calibration."  These activities are an integral part of production line quality control as they ensure that production machinery is operating in a proper fashion, thus ensuring that the end products of the production run are to the proper specifications.

CommentID: 440