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Business Taxes Law Guide—Revision 2024
Sales and Use Tax Annotations
A B C D E F G H I J L M N O P R S T U V W X
C
190.0000 Construction Contractors—Regulation 1521
Annotation 190.0160.325
(a) In General—Activities Constituting Contracting or Making of Improvements
190.0160.325 Components of a Water Reclamation System. The components of a water reclamation system will constitute machinery and equipment if the following sequential criteria of Regulation 1521 have been met:
(1) The property is intended to be used in the production, manufacturing, or processing of tangible personal property not essential to the fixed works (system), building, or structure itself; or
(2) The property is intended to be used in the performance of services or for other purposes such as research, testing, or experimentation, which uses are not essential to the fixed works (system); and
(3) The property is attached to the realty because of its nature and it does not lose its identity as a particular piece of machinery and equipment; and
(4) If attached to realty, is readily removable without damage to the unit or the realty.
The above criteria are not met if the property is:
(1) intended as a component part of the whole improvement; or
(2) part of a system which serves a common purpose for any part of the improvements; or
(3) attached to the land, building, structure, or system; or
(4) built into the building, structure, or system, or another fixture.
The machinery and equipment must be physically and functionally independent of the fixed works, building, structure or system. If it is so attached, the reason for the attachment must relate to the functional nature of the property and its ability to function as a particular piece of machinery and equipment. Accordingly, if it is attached and functions as part of, or in common with, the use or purpose of the improvement, it is not machinery and equipment.
Based on these criteria, the property installed in the water reclamation system should not be classified as machinery and equipment, since all components are attached and function as part of, or in common with, the use or purpose of the improvement. Therefore, components of the water reclamation system should be classified as either fixtures or material. 2/6/89; 5/4/96. 12/3/08. (Am. 1998-3, Am. 2010-1).