Did take-out pizza and pizza-delivery businesses qualify for the manufacturing exemption on electricity purchases?

Note -- superseded historical guidance. DRS marks this ruling "not current" and states that it was superseded by Policy Statement (PS) 94(3).

Plain-English summary

Take-out pizza and pizza-delivery businesses claimed that they manufactured or fabricated a finished product and therefore qualified for the historical sales-tax exemption on electricity.

DRS rejected the claim. The governing regulation required manufacturing to be the taxpayer's main purpose and the business to be generally recognized as an industrial plant.

Pizza businesses prepared and furnished meals for immediate take-out consumption. DRS therefore did not treat them as manufacturers or fabricators, and their locations were not industrial plants.

The businesses did not qualify for the electricity exemption and could not buy their equipment using a manufacturer's exemption certificate.

What this means for you

The historical ruling distinguished food preparation for immediate consumption from manufacturing at an industrial plant. PS 94(3) later superseded the guidance.

Common questions

Did making pizza count as manufacturing? No under the ruling.

Was the electricity purchase exempt? No.

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

Citations and references

• Conn. Gen. Stat. § 12-412(3), as amended by 1989 Conn. Pub. Acts 251.
• Conn. Agencies Regs. § 12-426-11b.
• Ziperstein v. Tax Commissioner, 178 Conn. 493 (1979) -- distinguished because its regulations had been repealed.
• Policy Statement (PS) 94(3) -- identified by DRS as superseding this ruling.

Source

• Landing page: Connecticut DRS Rulings
• Ruling: Ruling 90-1

Original ruling text

Ruling 90-1, Utility Exemption - Manufacturing

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

Ruling 90-1

Utility Exemption - Manufacturing

This Ruling has been superseded by   PS 94(3)

The issue presented to us is whether take-out pizza and pizza delivery businesses qualify for the exemption from the sales tax on the purchase of electricity pursuant to Conn. Gen. Stat. §12-412(3), as amended by Public Act No. 89-251, on the grounds that they are manufacturers or fabricators of a finished product to be sold.

We believe that your reliance on the case of Ziperstein v. Tax Commissioner , 178 Conn. 493 (1979), as legal support for your position is misplaced in view of the fact that the case was decided under regulations which were subsequently repealed.

The current regulations pertinent to the issue (Conn. Agencies Regs. §12-426-11b) define the terms "manufacturing", "manufacturing production process" and "industrial plant." Thus, in order to gain an exemption from the sales tax on the purchase of electricity, the taxpayer must have manufacturing as its main purpose and be generally recognized as an industrial plant.

It is our opinion that the taxpayer does not meet this burden. Take-out pizza and pizza delivery establishments are in the business of preparing and furnishing meals for immediate consumption on a take-out basis. They are not considered to be manufacturers or fabricators, nor is their place of business considered to be an industrial plant. It should also be noted that such businesses are not permitted to buy their equipment on a manufacturer's exemption certificate.

For the above stated reasons, the Department hereby rules that take-out pizza and pizza delivery businesses do not qualify for an exemption from the sales tax on the purchase of electricity.

LEGAL DIVISION

January 8, 1990