1. (1) General statement. The tax status of retail sales of industrial gases, welding rods, and fluxing materials depends upon the use of the property by the purchaser. Section 77.54 (2), Stats., exempts from the sales tax the sales price from the sales of and the storage, use or other consumption of tangible personal property or item under s. 77.52 (1) (b), Stats., that is used exclusively and directly by a manufacturer in manufacturing an article of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., that is destined for sale and that becomes an ingredient or component part of the article of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., destined for sale or is consumed or destroyed or loses its identity in manufacturing the article of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., destined for sale, except as provided in s. 77.54 (30) (a) 6., Stats. Section 77.54 (30) (a) 6., Stats., exempts from sales and use tax fuel and electricity consumed in manufacturing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., in this state. Therefore, the sale of industrial gases, welding rods, fluxing materials, or fuels shall be:

   1. (a) Exempt if they are used exclusively and directly by a manufacturer in manufacturing and become ingredients or component parts of tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., destined for sale.
   2. (b) Exempt if they are used exclusively and directly by a manufacturer in manufacturing and are consumed, destroyed, or lose their identity in manufacturing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., destined for sale.
   3. (bm) Exempt under s. 77.54 (30) (a) 6., Stats., if they are a fuel consumed in manufacturing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., in Wisconsin. A fuel is a material used to produce heat or power by burning, or is something that feeds a fire.
   4. (c) Taxable if they are sold to a person who consumes them in a nonmanufacturing activity.

2. (2) Industrial gases. Common types of industrial gases are argon, helium, hydrogen, nitrogen, acetylene, carbon dioxide, and oxygen.

   1. (a) Sales of industrial gases which are exempt if they are used exclusively and directly by a manufacturer in manufacturing and become an ingredient or component part of an article of tangible personal property or item or property under s. 77.52 (1) (b) or (c), Stats., destined for sale by the purchaser include:

      1. 1. Carbon dioxide used to produce dry ice or carbonated soft drinks.
      2. 2. Gases such as neon, helium, or argon used as a filler in the production of light bulbs and tubes.
      3. 3. Hydrogen used in hydrogenating vegetable oils.
      4. 4. Acetylene used as a base in the manufacture of synthetic materials.
      5. 5. Oxygen used in the chemical industry for oxidation processes, when not used as a fuel to produce heat.

   2. (b) Exempt sales of gases used by a manufacturer as fuel include:

      1. 1. Oxygen used in industrial furnaces that are used in manufacturing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., in Wisconsin.
      2. 2. Acetylene or other gases used in torches that are used in the manufacture of tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats.

   3. (c) Taxable sales of gases to nonmanufacturers, whether or not used by the purchaser as fuel, include:

      1. 1. Acetylene or other gases used by automobile body shops or by other repair establishments.
      2. 2. Gases used in mining or quarrying.
      3. 3. Nitrogen used by telephone companies in underground cables.
3. (3) Welding rods. Since welding rods, such as stick electrode and filler rods, are physically transferred and become a part of an item produced or repaired, their sale is exempt if used by the purchaser in producing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., destined for sale or in repairing tangible personal property or items, property, or goods under s. 77.52 (1) (b), (c), or (d), Stats., for a consideration. The sale of welding rods to manufacturers who use them in repairing their machinery used directly and exclusively in manufacturing is exempt. However, the sale of these rods to construction contractors for use in fulfilling real property construction contracts is taxable.

4. (4) Fluxing materials. Fluxing materials sold to a manufacturer for use exclusively and directly in manufacturing tangible personal property or items or property under s. 77.52 (1) (b) or (c), Stats., destined for sale are exempt because they are consumed in the manufacturing process. When fluxing materials are sold for use by a manufacturer to repair its own production machinery or equipment, a nonmanufacturing activity, they are taxable. Fluxing materials sold to a repair shop or to a real property construction contractor or to any other nonmanufacturer are taxable.

   Note: Section Tax 11.81 interprets s. 77.54 (2) and (30) (a) 6., Stats.

   Note: The interpretations in s. Tax 11.81 are effective under the general sales and use tax law on and after September 1, 1969, except: (a) The exemption for fuel and electricity consumed in manufacturing became exempt January 1, 2006, pursuant to 2003 Wis. Act 99; (b) The clarification that items must be consumed exclusively and directly by a manufacturer in manufacturing property or items destined for sale became effective August 1, 2009, pursuant to 2009 Wis. Act 28; and (c) The change of the term “gross receipts” to “sales price” and the separate impositions of tax on coins and stamps sold above face value under s. 77.52 (1) (b), Stats., certain leased property affixed to real property under s. 77.52 (1) (c), Stats., and digital goods under s. 77.52 (1) (d), Stats., became effective October 1, 2009, pursuant to 2009 Wis. Act 2.

History

History: Cr. Register, September, 1977, No. 261, eff. 10-1-77; am. (3) and (4), Register, June, 1991, No. 426, eff. 7-1-91; EmR0924: emerg. am. (title), (1) (intro.), (a), (b), (2) (intro.), (a) (intro.), 2., (b), (3) and (4), cr. (1) (bm), eff. 10-1-09; CR 09-090: am. (title), (1) (intro.), (a), (b), (2) (intro.), (a) (intro.), 2., (b), (3) and (4), cr. (1) (bm) Register May 2010 No. 653, eff. 6-1-10.