Arizona Court of Appeals Defines “Processing” for Manufacturing Exemption in Textile Sanitization Case

• The Arizona Court of Appeals affirmed that Angelica Textile Services does not qualify for the manufacturing exemption from use tax, agreeing with the Department of Revenue’s denial of a refund.
• The dispute centered on whether Angelica’s sanitization of textiles constituted “processing” under the manufacturing exemption.
• The court found that Angelica’s operations are primarily laundry and linen rental services, not manufacturing or processing of raw materials.
• The court emphasized that “processing” for the exemption requires transforming raw materials into a new or marketable form, which Angelica’s cleaning process does not achieve.
• Exemption claims are construed against the taxpayer, and the court held that Angelica’s activities did not meet the statutory definition of “processing” for the manufacturing exemption.

Source: salestaxinstitute.com

Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.

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