Three important law changes became effective on March 1, 2001:

1. The basis of tax on the usage of product that is held for sale in inventory is the cost of materials used to produce the item. For example, if you produce laser printers for sale and your office needs a laser printer, chances are you will use one of the printers that you manufacture. The use tax due on this withdrawal from inventory for use is the cost of materials only. No labor, no overhead. Under prior law, the use tax base was the “normal” selling price. This will mean substantial use tax savings for some taxpayers.

2. Machinery and equipment used in the control, prevention, or abatement of pollution or contaminants from manufacturing or industrial facilities are exempt. This broadens the existing exemption for equipment used to treat, bury, or store waste from a production process for control of air or water pollution.

3. Qualified Empire Zone Enterprises (QEZEs) are granted significant state tax exemptions on the purchase of tangible personal property and services. Now exempt are qualifying purchases of goods and services used directly and predominantly in the Empire Zone (previously called Economic Development Zone). In addition, utilities used directly and exclusively in the zone qualify. Telephone services qualify if delivered and billed to the QEZE at an address in the qualified empire zone. Also, motor vehicles purchased or rented that are used predominantly in the qualified empire zone are exempt from tax. Exemption Certificate ST-121.6, Qualified Empire Zone Enterprise Exempt Purchase Certificate must be issued to your vendor or contractor to secure the exemptions from sales tax.

Although exempt from state tax, local tax may apply if the local jurisdiction has not adopted the exemptions. Please refer to Chapter XII (Forms), pages 135C and 135D for a list of jurisdictions currently not providing the exemption.

Additional information can be obtained from TSB-M-01(1)S.