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Mid-America was involved in the “direct production” of “other tangible personal property,” it was entitled to the consumption exemption.  Id. at 263-64.

Just like Mid-America, Interstate is involved in the direct production of other tangible personal property in its operation of producing conditioned air.  Interstate uses compressors and condensers to remove heat, a form of energy, from ammonia to cool it to –20°.  The conversion of gas ammonia to a chilled liquid ammonia transforms the ammonia so that it is capable of cooling the storage units of Interstate’s customers.  The chilled ammonia is circulated through a closed loop cooling distribution system to chill the air in the storage rooms where Interstate’s customers kept their perishable food items.  When the temperature of the chilled refrigerant ammonia rises to 0°, it is returned through the same closed loop cooling distribution system to the central refrigeration system.  Upon receiving the warmed ammonia, Interstate re-chills it and sends it back through the closed loop system to its customers’ storage areas.

Analogous to Mid-America, where the process of chilling water created a significant change in the properties of the water and made it capable of cooling air in its customers’ buildings, Interstate’s processing of chilling ammonia created a significant change in the ammonia and made it capable of cooling air in its customers’ storage units.  See Id. at 263.  The chilling of the ammonia placed it in a form substantially different from that in which it was acquired.  See Indianapolis Fruit, 691 N.E.2d at 1385 (citing Ind. Admin. Code tit. 45, r. 2.2-5-10(k)). Interstate’s operation created a new and marketable good.  See Mid-America, 681 N.E.2d at 263.  Because Interstate consumed electricity in the direct production of other tangible personal property, it is entitled to the consumption exemption.

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