HOM

November 1, 2011

Re: LR -11- 119, ( Sales Tax Inquiry)

ISSIONPHONE( 405) 521- 3133

FACSIMILE ( 405) 522-0063

This is in response to your request regarding the application of Section 1361. 1 of Title 68 of theOklahoma Statutes as it applies to the sale for resale, manufacturing and agricultural exemptions. Set forth verbatim are the facts presented along with the questions posed and the responsesthereto.

Facts:

1. sells a variety of aggregate products, including ready -mixed concrete, sand, crushedstone, concrete block and masonry products ( collectively, the Aggregates") in addition toancillary items used in connection with the Aggregates ( together, with the Aggregatesreferred to as the " Products"), to customers (the " Sale").

2. charges the applicable rate of sales tax on the Aggregates at the time of the Saleunless an exemption is claimed as outlined below.

3. On certain Sales, is presented with an exemption request claiming one of thefollowing types of exemptions:

a. Sale for Resale Exemption;

b. Manufacturing Exemption; or

c. Agricultural Exemption.

4. For purchasers claiming the Sale for Resale Exemption, except as provided in paragraph 7below, at the time of the Sale

a. obtains a copy of the purchaser' s sales tax permit; b. obtains certification via a separate document where the purchaser certifies that theProducts are being purchased for resale and that the purchaser is in the business of resellingthe Products;

c. obtains the purchaser or it agent' s signature; and

2501 NORTH LINCOLN BOULEVARD • OKALHOMA CITY • OKLAHOMA 73194

IT IS OUR MISSION TO SERVE THE PEOPLE OF OKLAHOMA BY PROMOTING TAX COMPLIANCE THROUGH QUALITY SERVICE AND FAIR ADMINISTRATION

d. in instances where is making repeated sales to a purchaser claiming the Sale forResale Exemption, Dolese obtains an initial certification that indicates that all purchases ofthe Products by the purchaser are for resale and does not obtain further certification fromthat purchaser until the expiration date of their permit.

5. For purchasers claiming the Manufacturing Exemption, except as provided in paragraph 7below, obtains a copy of the purchaser' s manufacturer' s exemption permit at thetime of sale.

6. For purchasers claiming the Agricultural Exemption, except as provided in paragraph 7below, at the time of the Sale

a. obtains a copy of the purchaser' s agricultural exemption permit card; b. obtains certification on the face of the invoice with the following language:

PURCHASER CERTIFIES UNDER PENALTY OF PERJURY THAT HE ISENGAGED IN FARMING OR RANCHING AND THE PROPERTYPURCHASED WILL BE USED IN HIS FARMING OR RANCHINGOPERATION"; and

c. obtains the purchaser or his agent' s signature.

7. In the case of continued sales to the same purchaser claiming a Sale for Resale, Manufacturing or Agricultural Exemption, keeps on file, respectively, a currentcopy of the purchaser' s Sale Tax Permit, Manufacturing Exemption Permit or AgriculturalExemption Permit, respectively.

Applicable Law:

The sale of tangible personal property in Oklahoma, unless specifically exempted by theprovisions of the Oklahoma Sales Tax Code, is subject to the levy of sales tax. 68 O. S.

1354(A)(1).

as a vendor is required to collect from the consumer or user' and the consumer or user isrequired to pay to the vendor as trustee for and on account of the state the sales tax levied by theOklahoma Sales Tax Code. 68 O. S. 1361(A)(1).

Pursuant to Section 1361. 1 of Title 68 a vendor shall be relieved of liability for the sales tax orthe duty to collect the sales tax imposed by Section 1361 of Title 68, if the vendor, in good faith, timely accepts from a consumer properly completed documentation certified by the OklahomaTax Commission that the consumer is exempt from sales tax. To implement this Section theCommission promulgated OAC 710: 65- 7-6 which provides in pertinent part as follows:

c) General requirements. Three requirements must be met before the vendor or certified serviceprovider is relieved ofliability.

Consumer or user means a person to whom a taxable sale of tangible personal property is made or to whom ataxable service is furnished."

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1) Vendor or certified service provider good faith. Good faith requires that the vendor

strictly comply with statutory requirements.

2) Timely acceptance from a consumer. Timely acceptance from a consumer requires thatdocumentation be in the possession of the vendor within ninety (90) days subsequent to the dateof sale. In the case of continued sales to the same purchaser, the vendor must have, on file, asales tax permit, card, or exemption letter for each renewal interval. If no renewal interval is

provided by statute, the renewal period will be deemed three ( 3) years, except in the case ofentities with specific statutory exemptions who have established eligibility as set out in 710:65- 7- 15 and 710:65-7- 17 through 710: 65- 7- 19.

3) Properly completed documentation certified by the Oklahoma Tax Commission. Examples of properly completed documentation certified by the Oklahoma Tax Commission aredescribed in 710:65- 7- 8 through 710:65- 7- 15 and 710: 65- 7- 17 through 710:65- 7- 19.

OAC 710: 65- 7- 6( c).

Resale Exemption 68 O.S. § 1357(3)

Oklahoma Administrative Code 710:65- 7-8 outlines the properly completed documentation thatmust be accepted from a purchaser claiming a sales tax exemption for resale and retained by thevendor in order for the vendor to be relieved of any liability for the sales tax and the duty tocollect imposed by 68 O. S. § 1361 of Title 68 which is set forth below:

1), A copy of the purchaser's sales tax permit, or if unavailable, the purchaser's name, address, sales tax permit number, and its date of expiration. If a copy of the sales tax permit isunavailable, and if the information provided has not been previously verified, it must beverified by either calling the Taxpayer Assistance Division or by reference to the sales taxpermit list obtained pursuant to OAC 710:65- 9-6;

2) A statement that the articles purchased are purchased for resale;

3) The signature of the purchaser or a person authorized to legally bind the purchaser; 4) Certification on the face of the invoice, bill or sales slip or by a separate document, that

says the purchaser is engaged in reselling the articles purchased; and, 5) In cases where purchases are made on regular basis, and the certification indicates that all

purchases are for resale, then subsequent purchases may be made without further certificationuntil the expiration date of the permit.

Manufacturing Exemption 68 O.S. § 1359( 1)

Oklahoma Administrative Code 710: 65- 7- 9 contains the properly completed documentation thatmust be accepted from a purchaser claiming a manufacturing exemption and retained by thevendor in order for the vendor to be relieved of any liability for the sales tax and the duty tocollect imposed by 68 O. S. § 1361 of Title 68 which is set forth as follows:

In the case of sales to purchasers claiming exemption for manufacturing, the vendor must obtaina copy of the purchaser' s manufacturer's exemption permit issued pursuant to 68 O. S. § 1359.2

hereafter referred to as " Sales/ Manufacturers Permit"), or if unavailable, the name, address, and

Sales/ Manufacturers Permit Number of the purchaser or, a statement that contains the information

that would appear on the Sales/Manufacturers Permit. If a copy of the Sales/ Manufacturers Permitis unavailable and if the information provided has not been previously verified, it must be verified

by either calling the Taxpayer Assistance Division or by reference to the sales tax permit listobtained pursuant to OAC 710:65- 9- 6.

Agricultural Exemption 68 O.S. § 1358

Oklahoma Administrative Code 710: 65- 7- 11 sets forth the properly completed documentationthat must be accepted from a purchaser claiming a sales tax exemption for agriculturalproduction and retained by the vendor in order for the vendor to be relieved of any liability forthe sales tax and the duty to collect imposed by 68 O. S. § 1361 of Title 68 which is outlined as

follows:

1) A copy of the agricultural exemption permit card; and, 2) In the circumstances defined in (A) and (B) of this subparagraph, certification on the face of the

invoice or sales ticket is required:

A) From any person purchasing feed for horses, mules, or draft animals used directly inthe production and marketing of agricultural products; orB) From any person who is making purchases of materials, supplies, or equipment to be

used in the construction of livestock facilities, including facilities for the production andstorage of feed, pursuant to a contract with an agricultural permit holder. [ See: 68 O. S.§ 1358( 8) and 710: 65- 13- 171.

OAC 710:65- 13- 17(c) and ( d) outline the specific details of the certification required under thecircumstances set forth in subparagraph (B) of OAC 710: 65- 7- 11:

c) Material purchased for the construction of livestock facilities. Certification on the face ofthe invoice or sales ticket is required from any person acting pursuant to a contract with the permitholder on purchases of materials, supplies, and equipment to be utilized in the construction of a

livestock facility, being used or to be used in the production of any livestock, including facilities forthe production and storage of feed. The certification must contain the information set out insubsection (d) and be signed by the purchaser. d) Certification for use when purchasing materials for construction of livestock facilities.

The following or equivalent thereof shall be executed by the contractor when purchasing materialspursuant to 68 O. S. § 1358( 8).

1) Statement under oath. " Purchaser certifies under penalty of perjury that the items arepurchased pursuant to contract and are for use in the construction of a livestock facility owned bythe agricultural permit number holder identified herein." 2) Identifying number. " The qualifying Agricultural Exemption Permit Number

is and is issued to

Question 1

1. Based on the Statement of Facts outlined in paragraph 4, in the event a purchaser claims aone- time Sale for Resale Exemption on the Products, will be relieved of any liability forthe sales tax and duty to collect the sales tax related to the one-time Sale of the Products to thepurchaser?

Response:

Please note that no provision exists in the Oklahoma statutes to allow pass through of a resaleexemption. Therefore, a third parry' s Oklahoma sales tax permit may not be used to exempt asale from to its customer. Consequently, so long as, the sale by is invoiced to andpaid for with funds of the sales tax permit holder and in good faith accepts and retains thedocumentation set forth in paragraph 4 above, will be relieved from any liability for thesales tax and the duty to collect sales tax on the transaction.

Question 2

Based on the Statement of Facts outlined in paragraphs 4 and 7, in the event a purchaser claims arecurring Sales for Resale Exemption on the Products, will be relieved of any liability forthe sale tax and duty to collect the sales tax related to the recurring Sale of the Products to thepurchaser?

Response:

Yes, if the purchaser indicates on the initial certification which contains the properly completeddocumentation required in 710: 65- 7- 8 that all purchases are for resale, will be relieved ofany liability for the sales tax and the duty to collect sales tax on the recurring purchases withoutfurther certification until the expiration date of the permit.

Question 3

Based on the Statement of Facts outlined in paragraphs 5 and 7, in the event a purchaser claims aManufacturing Exemption on the Products, will be relieved of any liability for the salestax and duty to collect the sales tax related to the sale of the Products to the purchaser claimingsuch Manufacturing Exemption?

Response:

Except under the circumstances outlined below, a person i. e., contractor or subcontractor, maynot make purchases of tangible personal property exempt from sales or use tax pursuant to theexemption afforded manufacturers in Section 1359( 1) of Title 68 of the Oklahoma Statutes. Consequently, in order for this exemption to be applicable to a transaction, the sale must be madeto the manufacturer holding a Manufacturers Sales Tax Exemption Permit -invoiced to and paidfor with funds of said entity. However, an exception to the general rule was established pursuantto the passage of House Bill 1954, effective August 26, 2011, which provides for purposes of themanufacturing exemption in Section 1359( 1) of Title 68, that sales made to persons that haveentered into a contractual relationship for the construction and improvement of manufacturinggoods, wares, merchandise, property, machinery and equipment for use in a manufacturingoperation shall be considered sales to a manufacturer which is classified in the North AmericanClassification System ( NAICS) Manual under Industry Group No. 324110 [ Petroleum

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Refinery]? 68 O. S. Supp. 2011 § 1359( 1). Please note that neither a manufacturer nor a personwith whom a manufacturer classified under NAICS No. 324110 has entered into a constructioncontract may make purchases of tangible personal property or services exempt from sales/ use taxfor use in site construction of a manufacturing facility nor are they permitted to make purchasesexempt from tax for use in the areas of sales, administration, site maintenance, transportation ordistribution. OAC 710: 65- 13- 150. 1. Therefore, if has actual knowledge that the itemsbeing purchased are not made by the exempt entity for an exempt use covered under 1359( 1) ofTitle 68, securing a copy of a manufacturers sales tax exemption permit will not be sufficient torelieve it from liability for the sales tax or the duty to collect sales tax pursuant to Section 1361of Title 68. Otherwise, based on the statement of facts outlined in paragraphs 5 and 7, will be relieved from liability for the sales tax and the duty to collect on sales of products topurchasers claiming a manufacturing exemption.

Question 4

Based on the Statement of Facts outlined in paragraphs 6 and 7, in the event a purchaser claimsan Agricultural Exemption on the Products, will be relieved of any liability for the salestax and duty to collect the sales tax related to the sale of the Products to the purchaser claimingsuch Agricultural Exemption so long as the purchase of the Products are not those Products in 68O. S. § 1358( A)(8) and OAC 710: 65- 7- 11( 2)?

Response:

In order to qualify for the sales tax exemption in Section 1358 of Title 68, sales must be made tothe qualifying person, the holder of an agricultural exemption permit—invoiced to and paid forwith funds of said person. Additionally, in accordance with Section 1358. 1, a vendor must honora claim for sales tax exemption by an agricultural exemption permit holder. Therefore, Will be relieved of liability for the sales tax and duty to collect the sales tax related to the sale ofthe Products to the purchaser claiming the Agricultural Exemption so long as the purchase of theProducts are not those Products in 68 O. S. § 1358(A)(8) and OAC 710: 65- 7- 11( 2) and

obtains a copy of the purchaser' s agricultural exemption permit.

Notwithstanding the above paragraph, a contractor who has contracted with an agriculturalpermit holder to construct a facility which will be used directly in the production of anylivestock, including facilities used in the production and storage of feed for livestock owned bythe agricultural permit holder, may make purchases of materials, supplies and equipmentnecessary to fulfill the contract, exempt from sales tax. will be relieved of any liability forthe sales tax and the duty to collect sales tax for a sale to a contractor claiming exemption pursuantto Section 1358( A)(8) of Title 68 if timely accepts the documentation outlined inOklahoma Administrative Code 710: 65- 7- 11 and 710: 65- 13- 17( c)( d).

Z These purchases shall be evidenced by a copy of the sales ticket or invoice to be retained by the vendor indicatingthat the purchases are made for and on behalf of such manufacturer and set out the name of such manufacturer aswell as include a copy of the Manufacturing Exemption Permit of the manufacturer. 68 O.S. Supp. 2011 § 1359( 1).

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Question 5

is not required to obtain the certification listed in paragraph 6( b) and 6(c) for sales to apurchaser claiming an Agricultural Exemption unless the Agricultural Exemption is for Productsfound in 68 O. S. § 1358(A)(8) and OAC 710: 65- 7- 11( 2).

Response:

Correct, is not required to obtain the certification listed in paragraphs 6( b) and 6( c) forsales to purchasers claiming an agricultural exemption unless the claimed exemption is forpurchases of feed for horses, mules, or draft animals used directly in the production and marketingof agricultural products; or materials, supplies, or equipment to be used in the construction oflivestock facilities, including facilities for the production and storage of feed, pursuant to a contractwith an agricultural permit holder.

This response applies only to the circumstances discussed in your request. Pursuant to

Oklahoma Administrative Code 710: 1- 3- 73( e), this Letter Ruling may be generally relied upononly by the entity to whom it is issued, assuming that all pertinent facts have been accurately andcompletely stated, and there has been no change in applicable law.

Sincerely,

OKLAHOMA TAX COMMISSION

C44& Ue20J

Christy J. CaesarTax Policy Analyst

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