ALABAMA DEPARTMENT OF REVENUE
SALES, USE & BUSINESS TAX DIVISION
SALES & USE TAX RULE
810-6-1-.80. Ingredient or Component of Product Manufactured or
Compounded for Sale.
(1) Subject to the qualifications outlined in paragraph (2), tangible
personal property which is purchased by a manufacturer or compounder and
which enters into and becomes an ingredient or component part of the final
product manufactured or compounded for sale may be purchased at wholesale,
tax free, for both sales and use tax purposes, regardless of whether the
property is used with the intent that it becomes an ingredient or component
part of the finished product. The burden of proving that materials become
an ingredient or component part of the finished product shall be carried
by the manufacturer or compounder. (Sections 40-23-1(a)(9)b and 40-23-60(4)b)
(2) In order to qualify for the wholesale sale exclusion contained in
Sections 40- 23-1(a)(9)b and 40-23-60(4)b, the tangible personal property
purchased by the manufacturer or compounder must be present in the final
product and must not be deducted as depreciation or as a Section 179 expense
deduction as allowed under Section 40-18-35(a)(17), on the manufacturer's
or compounder's Alabama income tax return. (Section 40-23-1(a)(9)b and
40-23-60(4)b), (Adopted October 1, 1959; readopted through APA effective
October 1, 1982; amended February 4, 1985, amended December 10, 1997).
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