Section Tax 11.41 - Exemption of property and items consumed or destroyed in manufacturing(1) GENERAL. (a) Tangible personal property and items under s. 77.52(1) (b), Stats., that are used exclusively and directly by a manufacturer in manufacturing an article of tangible personal property or item or property under s. 77.52(1) (b) or (c), Stats., that is destined for sale and that becomes an ingredient or component part of the article of tangible personal property or item or property under s. 77.52(1) (b) or (c), Stats., destined for sale or is consumed or destroyed or loses its identity in manufacturing the article of tangible personal property or item or property under s. 77.52(1) (b) or (c), Stats., destined for sale is exempt from Wisconsin sales or use tax under s. 77.54(2), Stats., except as provided in s. 77.54(30) (a) 6, Stats.(b) Manufacturing is defined in s. 77.51(7h), Stats., to mean the production by machinery of a new article of tangible personal property or item or property under s. 77.52(1) (b) or (c), Stats., with a different form, use, and name from existing materials, by a process popularly regarded as manufacturing, and that begins with conveying raw materials and supplies from plant inventory to the place where work is performed in the same plant and ends with conveying finished units of tangible personal property or item or property under s. 77.52(1) (b) or (c), Stats., to the point of first storage in the same plant.(2) PROPERTY AND ITEMS EXEMPT. (a) The following property and items are within the exemption provided by s. 77.54(2), Stats., if the property or item is used exclusively and directly by a manufacturer in manufacturing tangible personal property or items or property under s. 77.52(1) (b) or (c), Stats., destined for sale and is consumed, destroyed, or loses its identity in manufacturing the property or item that is destined for sale: 4. Cleaning compounds and solvents for maintaining exempt manufacturing machinery whether used while the machinery is operating or while the machinery is idle.5. Cutting and lubricating oils.10. Lapping and grinding compounds.14. Wood used to smoke products.15. Gloves and other wearing apparel, including hair nets, beard nets and facemasks used by employees working on the production line to prevent contamination of the product while it is being manufactured. Examples:
1) Employees of Manufacturer A wear gloves and aprons while grading, weighing, and slicing meat products within the scope of manufacturing as defined in s. Tax 11.39(2). The gloves and aprons are used only in this manner and prevent the meat products being manufactured from being contaminated. The gloves and aprons worn by the employees to protect the meat products from contamination are used directly in manufacturing and qualify for exemption from Wisconsin sales and use tax under s. 77.54(2), Stats.2) Employees of Manufacturer B wear gloves and aprons while they are working on the production line. The gloves and aprons are used only in this manner. The gloves and aprons are worn to protect the employees' clothing rather than to prevent contamination of the product while it is being manufactured. Although the gloves and aprons are used exclusively in manufacturing, the gloves and aprons are not used directly in manufacturing and do not qualify for exemption from Wisconsin sales and use tax under s. 77.54(2), Stats.(b) Tangible personal property and items under s. 77.52(1) (b), Stats., used exclusively and directly by a manufacturer and which become an ingredient or component part of tangible personal property or an item or property under s. 77.52(1) (b) or (c), Stats., destined for sale as tangible personal property or an item or property under s. 77.52(1) (b) or (c), Stats., is exempt from Wisconsin sales or use tax. Examples:
1) Property and items sold to an automobile repair shop or other repair business to repair a customer's product does not qualify for exemption under s. 77.54(2), Stats., because the property or items are not used exclusively and directly by a manufacturer in manufacturing.2) A manufacturer-contractor is not entitled to the exemption when purchasing tangible personal property or items under s. 77.52(1) (b), Stats., consumed, destroyed or losing its identity in manufacturing building components which it, as a contractor, will affix to real property in a real property construction activity, because the item or property is not sold by the manufacturer-contractor as tangible personal property or an item or property under s. 77.52(1) (b) or (c), Stats.(3) PROPERTY AND ITEMS NOT EXEMPT. (a) An exemption under sub. (1) (a) is not allowed for property or items consumed or destroyed or losing their identity in manufacturing if any of the following apply: 1. The activity is not manufacturing or is not within the scope of manufacturing.2. The property or item manufactured is not destined for sale as tangible personal property or an item or property under s. 77.52(1) (b) or (c), Stats.3. The property or item is not used exclusively and directly by a manufacturer in manufacturing.(b) The following property and items are not within the exemption provided by s. 77.54(2), Stats., although the property or item may be exempt under s. 77.54(6) (am) 1, Stats., if the property or item is a machine or specific processing equipment, or a part for that machine or equipment, used exclusively and directly in manufacturing, as described in s. Tax 11.40: 1. Machine drills and auger bits.4. Chucks, jigs, and dies.7. Hand tools, including files, wrenches, hammers, saws, screwdrivers, planes, punches, chisels, and spray guns.8. Wearing apparel for the comfort or welfare of the employee or for the protection of the employee's clothing, such as helmets, hard hats, work gloves, aprons, coveralls, pants, coats, and fur-lined boots and jackets. Example: Employees of Manufacturer C wear hard hats, as required by federal regulations, while working within the scope of manufacturing as defined in s. Tax 11.39(2). The hard hats are worn to protect the employees. The hard hats are not used directly in manufacturing and do not qualify for exemption from Wisconsin sales and use tax under s. 77.54(2), Stats.
9. Chemicals and cleaning agents used to clean the room where manufacturing takes place, including walls, ceilings, floors, drains, windows, and doors, even if the cleaning is required in order to meet sanitation standards required by state and federal regulatory agencies.(4) FUEL AND ELECTRICITY. (a) Fuel and electricity are specifically excluded from the exemption provided by s. 77.54(2), Stats. However, an exemption is provided in s. 77.54(30) (a) 6, Stats., for fuel and electricity consumed in manufacturing tangible personal property or items or property under s. 77.52(1) (b) or (c), Stats., in this state. Consistent with s. 77.51(7h), Stats., "fuel and electricity consumed in manufacturing" means only fuel and electricity used to operate machines and equipment used directly in the step-by-step manufacturing process and does not include fuel and electricity consumed in providing plant heating, cooling, air conditioning, communications, lighting, safety and fire prevention, storing raw materials or finished units of tangible personal property or items or property under s. 77.52(1) (b) or (c), Stats., research and product development, delivery to or from the plant, repairing or maintaining plant facilities, or shipping, advertising, distribution, sales, or administrative department activities.(b) Fuel includes: 1. Oxygen used to enrich the fuel mixture in an industrial furnace, or oxygen and acetylene used in a welding process.2. Coal or coke used by a foundry, except the portion of the coke which actually becomes an ingredient or component part of any grey-iron produced.3. Gasoline, fuel oil, kerosene, natural gas, liquid propane gas, also called LPG, or other natural or synthetic liquids used as fuel. Note: Since "fuel" is not defined in the sales and use tax statutes, it shall be given its ordinary meaning as provided in a dictionary. Dictionaries generally define fuel as a material used to produce heat or power by burning, or something that feeds a fire.
Note: Section Tax 11.41 interprets ss. 77.51(7h) and 77.54(2), (6) (am) 1. and (cn), and (30) (a) 6, Stats.
Wis. Admin. Code Department of Revenue Tax 11.41
Cr. Register, November, 1977, No. 263, eff. 12-1-77; cr. (3) (a) 15. and am. (4) (h), Register, October, 1979, No. 286, eff. 11-1-79; am. (3) (a) 4., Register, July, 1987, No. 379, eff. 8-1-87; am. (5) (intro.), Register, April, 1990, No. 412, eff. 5-1-90; am. (2) (intro.), (3) (b) and (4) (intro.), cr. (5) (c), Register, March, 1991, No. 423, eff. 4-1-91; r. and recr. (1), r. (2), (3) (b), cr. (2) (a) 4. b., (b), (4) (b) (intro.), renum. (3) (a) (intro.), 1. to 15., (4), (5) (intro.), (a), (b) and (c) to be (2) (a) (intro.), 1. to 4. a., 5 to 15., (3), (4) (a), (b) 1. to 3. and am. (2) (a) 4. a., (3) (intro.), (4) (a), Register, October, 1997, No. 502, eff. 11-1-97; am. (1) (b) 2. b., (3) (b) and (h), Register, August, 1999, No. 524, eff. 9-1-99; EmR0924: emerg. am. (title), (1) (a), (2) (title), (a) (intro.), (b) and (4) (a), r. and recr. (1) (b) and (3), eff. 10-1-09; CR 09-090: am. (title), (1) (a), (2) (title), (a) (intro.), (b) and (4) (a), r. and recr. (1) (b) and (3) Register May 2010 No. 653, eff. 6-1-10; CR 10-094: am. (2) (a) (intro.), 15., (3) (a) (intro.), r. and recr. (2) (a) 4., cr. (3) (a) 3., (b) 9. Register November 2010 No. 659, eff. 12-1-10; correction in (3) (b) (intro.) made under s. 13.92(4) (b) 7, Stats., Register August 2014 No. 704.Amended by, correction in (4) (Note [2]) made under s. 35.17, Stats., Register March 2017 No. 735, eff. 4/1/2017.Amended by, CR 19-112: am. (4) (a) Register June 2020 No. 774, eff. 7/1/2020The interpretations in s. Tax 11.41 are effective under the general sales and use tax law on and after September 1, 1969, except that (a) The exemption for wood residue was effective on September 1, 1987, pursuant to 1987 Wis. Act 27; (b) The exemption for fuel and electricity consumed in manufacturing was effective January 1, 2006 pursuant to 2003 Wis. Act 99; (c) The requirement that property and items which qualify for exemption under s. 77.54(2), Stats., be consumed exclusively and directly by a manufacturer in manufacturing property and items destined for sale became effective August 1, 2009, pursuant to 2009 Wis. Act 28; and (d) The change of the term "gross receipts" to "sales price" and the separate impositions of tax on coins and stamps sold above face value under s. 77.52(1) (b), Stats., and certain leased property affixed to real property under s. 77.52(1) (c), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2.