North Carolina Lawyers Weekly
During the tax years in question, the respondent-taxpayer “manufactured” vast quantities of hot mix asphalt. It did so by using the process that our Supreme Court has repeatedly described as manufacturing, i.e., “the producing of a new article . . . by the application of skill and labor to the raw materials of which it is composed.” Duke Power Co. v. Clayton, Comr. of Revenue, 274 N.C. 505 (1968). With respect to such asphalt, respondent is responsible only for our lower privilege tax on the raw materials it purchased rather than the higher sales and use tax; this results from application of the “Mill Machinery Exemption,” which applies to a “manufacturing industry or plant that purchases mill machinery . . . parts or accessories for storage, use or consumption in this State.”
The court affirms the Office of Administrative Hearings’ final decision entering summary judgment in favor of respondent.
Over the three-year period in question (2012-2014), respondent produced more than 1.6 million tons of hot mix asphalt, most of which it used in construction projects in its role as a contractor. Yet even if we were to conclude that the created product at issue must have been sold to third parties in order for a manufacturing exemption to apply, any such requirement has been satisfied here since respondent sold to third parties more than 300,000 tons of hot mix asphalt during that three-year period.
North Carolina Department of Revenue v. FSC II, LLC (Lawyers Weekly No. 020-009-23, 27 pp.) (Mark Davis, J.) Ashley Hodges Morgan and Tania Laporte-Reveron for petitioner; Lee Hogewood, Robert Womble and Zachary Buckheit for respondent. 2023 NCBC 9
