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Business Taxes Law Guide—Revision 2024

Sales and Use Tax Annotations


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420.0000 Photographers, Photostat Producers, Photo Finishers and X-Ray Laboratories—Regulation 1528

Annotation 420.0680

(c) X-RAY FILMS AND RADIOGRAPHS.


420.0680 Correction of Manufacturing Defects. A taxpayer operates an inspection and certification service utilizing, among others, radiographic (x-ray) inspection procedures. The taxpayer also does fabrication and repair. If defects are found in the product, the taxpayer grinds out the defective area and corrects it by a welding process. Upon completion of the process, the taxpayer bills the customer for the inspection, for the corrections made (if any were needed), and for the number of x-ray films exposed and examined in the process. The films may be delivered to the customer along with the inspected products and the certification.

Although the films are correctly purchased tax-paid by the taxpayer, their subsequent retail sale by the taxpayer after use in the inspection process is subject to tax in those cases where title or possession passes to the customer without credit for the tax paid on the purchase. The charge for correcting defects is taxable if the item is new as the correction would be a step in the process of fabricating the item into a finished, usable product. If the item was used, the correction of defect would be repair labor, not subject to tax. 6/19/80.