consumption exemption, also referred to as one of the industrial exemptions,3 states:
Transactions involving tangible personal property are exempt from the state gross retail tax if the person acquiring the property acquires it for direct consumption as a material to be consumed in the direct production of other tangible personal property in the person’s business of manufacturing, processing, refining, repairing, mining, agriculture, horticulture, floriculture, or arboriculture.
Ind. Code § 6-2.5-5-5.1(b). The Department argues that Interstate is not entitled to the exemption because Interstate does not engage in the production or processing of other tangible personal property and is merely providing a service.
Production is broadly defined and focuses on the creation of a marketable good. Mid-America Energy, 681 N.E.2d at 262. See also Indiana Dep’t of State Revenue v. Cave Stone, Inc., 457 N.E.2d 520, 524-25 (Ind. 1983) (finding production occurred where trucks used to transport crude stone from the quarry to the crusher because trucks were essential to creation of new marketable good, i.e., transformation of crude stone to aggregate stone); Indianapolis Fruit Co. v. Dep’t of State Revenue, 691 N.E.2d 1379, 1385 (Ind. Tax Ct. 1998) (finding production where taxpayer actively transformed unmarketable bananas into marketable ones); Harlan Sprague Dawley, Inc. v. Ind. Dep’t of State Revenue, 605 N.E.2d 1222, 1223-24, 1228 (Ind. Tax Ct. 1992) (finding production occurred where rats were bred in sterile and quarantined environment to
3 The industrial exemptions “exempt from the sales tax certain purchases of tangible personal property used, consumed, or incorporated into other tangible personal property.” Harlan Sprague Dawley, Inc. v. Ind. Dep’t of State Revenue, 605 N.E.2d 1222, 1224 (Ind. Tax Ct. 1992). Some other industrial exemptions include Indiana Code §§ 6-2.5-5-3 (the equipment exemption) and 6-2.5-5-6 (the incorporation exemption). See Rotation Products Corp. v. Dep’t of State Revenue, 690 N.E.2d 795, 798 (Ind. Tax Ct. 1998) (citing Mid-America Energy Resources, 681 N.E.2d at 261; Harlan Sprague Dawley, 605 N.E.2d at 1224).
( “Tangible personal property” includes, among other things, electrical energy. Ind. Code § 6-2.5-5-5.1(a).