Are sales of commercial gases such as oxygen, acetylene, argon, and welding shielding gas exempt from New Jersey Sales Tax?

Plain-English summary

New Jersey treated sales of commercial gases as exempt from Sales Tax regardless of how the purchaser intended to use the gas.

The Sales and Use Tax Act generally taxes tangible personal property, and its definition expressly includes gases. But N.J.S.A. 54:32B-8.7 exempts sales of gas other than the listed utility-type categories described in the statute.

The Division said commercial gases such as oxygen, acetylene, and argon fall within that exemption. The result did not depend on whether the gas was consumed, used in production, or incorporated into another product.

The TAM's examples of exempt sales included:

• canisters of shielding gas used in welding; and
• gases applied during manufacturing even though they do not become a component of the finished product.

What this means for you

Sellers of industrial and commercial gases

The TAM supports exempt treatment for the commercial gases it describes. Keep product records showing what gas was sold and distinguish it from the categories excluded by the statutory wording.

Manufacturers and welders

The exemption did not require the gas to become part of the finished product. Use as a shielding or process gas could still qualify under the Division's analysis.

Tax teams

This is guidance accurate as of September 19, 2012. Check for later statutory, regulatory, judicial, or Division-policy changes before applying it to a current transaction.

Common questions

Q: Are gases tangible personal property under New Jersey law?
A: Yes. The TAM says gases are specifically included in that definition.

Q: Were oxygen, acetylene, and argon exempt?
A: Yes. The Division treated those commercial gases as within the exemption in N.J.S.A. 54:32B-8.7.

Q: Did the intended use of the gas matter?
A: No. The TAM states that the exemption applied regardless of intended use.

Q: Did manufacturing gas have to become part of the product?
A: No. The TAM expressly included gases applied during manufacturing that were not component parts.

Citations and references

• N.J.S.A. 54:32B-3(a) — tax on tangible personal property
• N.J.S.A. 54:32B-2(g) — tangible-personal-property definition
• N.J.S.A. 54:32B-8.7 — gas exemption

Source

• Landing page: https://www.nj.gov/treasury/taxation/tam-pubs.shtml
• Original PDF: https://www.nj.gov/treasury/taxation/pdf/pubs/tams/tam2012-2.pdf

Original ruling text

Sales of Commercial Gases
TAM 2012-2 – Issued September 19, 2012
Tax: Sales and Use Tax
The Sales and Use Tax Act imposes tax on sales of tangible personal property under
N.J.S.A.54:32B-3(a) unless a valid exemption exists. Tangible personal property is defined as
“personal property that can be seen, weighed, measured, felt, or touched, or that is in any other
manner perceptible to the senses”. N.J.S.A. 54:32B-2(g).
Gases are specifically included in the definition of tangible personal property. However, the law
provides an exemption from sales tax for “sales of gas other than natural gas, water, steam, or
fuel delivered to consumers through mains, lines, pipes, or in containers or bulk.” N.J.S.A.
54:32B-8.7.
The Division considers sales of commercial gases, such as oxygen, acetylene and argon, to fall
within the scope of the exemption above and are, therefore, exempt from the imposition of
Sales Tax regardless of the intended use of the gas. For example, exempt sales of gas include the
sale of canisters of shielding gases used in the welding process, and gases applied (but which
are not a component part) during the manufacturing process.

Note: A Technical Advisory Memorandum (“TAM”) is an informational statement of the law,
regulations, or Division policies. It is accurate on the date issued. Subsequent changes in the law
or regulations, judicial decisions or changes in Division policies could affect the validity of the
information presented in a TAM.

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