The Ohio Board of Tax Appeals recently decided in favor of the taxpayer in a dispute that focused primarily on when the taxpayer’s manufacturing process began. Under Ohio law, a sales and use tax exemption exists for purchases made for use “primarily in a manufacturing operation to produce tangible personal property for sale.” Before the Board, the taxpayer argued that process of manufacturing corn-based products at its facility began at the point the corn passed through a magnet to remove impurities. In the taxpayer’s view, the equipment used from that point on was exempt. The Board noted that under a prior Ohio Supreme Court case, “manufacturing” begins when two conditions have been met. The first is when raw materials have been changed, converted, or transformed into a different state or form from which they previously existed. The second condition is when raw materials have been “committed” to the manufacturing process, meaning that the initial storage of the raw materials has ceased. In addressing the first condition, the Board ruled that the magnet refined and changed the corn by removing undesirable metal contaminants, and thus was the first step in the beginning of the manufacturing process. Further, once the corn passed beneath the magnet, the corn was within a closed manufacturing system and was committed to the next step in the manufacturing process. The Board concluded that the taxpayer was entitled to the exemption. For more information on Marion Ethanol v. McClain, please contact Dave Perry at 513-763-2402.