Indiana Enacts Gross Retail Tax Exemptions and Extends Time Period for Filing Refund Claims for Utilities Used in Manufacturing

Indiana Governor Mitch Daniels recently signed House Bill 1072 (“HB 1072”), providing new gross retail tax exemptions and extending the period for certain refund claims.

Effective July 1, 2012, HB 1072 eliminates the prohibition of filing an appeal with the tax court, if the Indiana Department of Revenue (“Department”) takes longer than three years to settle a claim. Under current law, the tax court does not have jurisdiction to hear a refund appeal filed more than three years after the date the claim was originally filed with the Department.

HB 1072 extends the time period for claiming a sales tax refund based on the exemption provided for electricity, gas, water, steam, and steam heat consumed in the production of tangible personal property. Effective July 1, 2012, a taxpayer in the business of manufacturing, processing, refining, repairing, mining, agriculture, horticulture, floriculture, or arboriculture will have 36 months to file a refund claim for utilities consumed in such activities. Under current law, refund claims are required to be filed within 18 months.

The exemption for sales of electricity, natural or artificial gas, water, steam, and steam heat by a power subsidiary or public utility is extended to use in processing, repairing, floriculture, and arboriculture. The exemption for utilities used in these activities is effective after December 31, 2012.

Further, HB 1072 provides a retroactive exemption (back to January 1, 2012) for taxpayers in the business of recycling. Recycling companies may claim an exemption on electricity, gas, water, steam, and steam heat used in recycling. HB 1072 exempts machinery, tools, and equipment used in the direct processing of recycling materials. Further, HB 1072 provides an exemption for recycling materials and other property consumed in the recycling process or that becomes a part of a final product produced. These exemptions are retroactively effective January 1, 2012.

Effective July 1, 2012, there will be a sales tax exemption for certain wrapping materials and nonreturnable containers used by processors and service providers to ship products serviced back to owners who must sell the processed property as is or as a part of other property.