Did rebuilding automobile and truck engines qualify as manufacturing under Connecticut Ruling 89-3?

Plain-English summary

X Company bought old automobile and truck engines from salvage yards, bought new OEM parts, and built engines for resale.

The Department concluded that the operations were not manufacturing. Rebuilding an engine with new parts did not substantially transform the property into a different product and did not place the engine in a different form.

Because the engines were resold, parts incorporated into the engines could be purchased on a resale certificate. The company could not use a manufacturer's exemption certificate to buy machinery used in the operation.

The official archive says the ruling was obsoleted by Announcement 94(4).

What this means for you

The historical ruling separated resale treatment for parts that became part of the sold engines from manufacturing status for the rebuilding process itself.

Common questions

Was engine rebuilding manufacturing? No.

Could incorporated parts be bought for resale? Yes.

Could the business use a manufacturer's certificate for machinery? No.

Citations and references

• Conn. Agencies Regs. § 12-426-11b(a)(7), (10), and (11), as cited in the ruling.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 89-3

Original ruling text

Ruling 89-3, Manufacturing

This information is not current and is being provided for reference purposes only

Ruling 89-3

Manufacturing

This Ruling has been obsoleted by   AN 94(4)

You have requested a ruling as to whether the business activities of X Company constitute manufacturing.

As we understand the facts, X Company purchases old automobile and truck engines from salvage yards. X Company also purchases OEM parts from suppliers and builds new engines that are then resold.

While there is no statutory definition of "manufacturing," section 12-426-11b(a)(10) of the Regulations of Connecticut State Agencies provides that "'manufacturing' shall mean the performance as a business of an integrated series of operations which places personal property in a form, composition or character different from that in which it was acquired for sale in the regular course of business by the manufacturer. The change in form, composition, or character must be a substantial change, and it must result in a transformation of property into a different product having a distinctive name, nature and use. Operations such as compounding or fabricating are illustrative of the types of operation which may result in such a change. 'Manufacturing' is an activity which shall occur solely at an industrial plant."

Section 12-426-11b(a)(7) of the Regulations of Connecticut State Agencies in turn provides that an "'industrial plant' shall mean a manufacturing facility at which a manufacturing production process is occurring. . . ." A "manufacturing production process" is defined by these same regulations as "any one of a series of production activities, beginning with the movement of the raw materials after their receipt, inspection and storage, to the first production machine and ending with the completion of the finished product, including any packaging operations, for its sale to the ultimate consumer. . . ." Regs. Conn. State Agencies §12-426-11b(a)(11).

It is our opinion that X Company's business activities do not constitute manufacturing under the above definitions. There is no substantial change resulting in a transformation of property into a different product as a result of the process. Furthermore, X Company's operation does not place the engine in a different form, but merely rebuilds the engine with new parts.

Because the engines are resold, the parts bought for inclusion into the product for sale may be purchased on a resale certificate. However, X Company may not use a manufacturers exemption certificate to purchase machinery involved in its business operation.

TIMOTHY F. BANNON

COMMISSIONER

March 29, 1989