Ohio Sales/Use Tax Manufacturing Exemption: Accelerate the Beginning of the Manufacturing Process

Ohio’s manufacturing exemption (R.C. 5739.011) is available for property primarily used to produce tangible personal property for sale. Of course, the manufacturer wants to exempt its property as soon as possible, which begins when the manufacturer’s raw materials are “committed.” A common misunderstanding is that raw materials must be transformed in some way, such as heating, mixing, shaping, etc., to mark their “commitment.”

However, raw materials can be committed before any transformation occurs, as long as they had been removed from initial storage. In other words, as soon as material handling from initial storage ceases, the manufacturing exemption commences – raw materials have been committed. O.A.C. 5703-9-21(B)(1). Accordingly, equipment used primarily to move such raw materials after their commitment is exempt from tax even though the transformation of the raw materials into the final product has not begun yet.

Keep this broad exemption in mind when considering the scope of your manufacturing process. Contact us if you have questions about the scope of the manufacturing exemption.