No Sales Tax on Manufacturing Test Equipment in Virginia

The Virginia Department of Taxation has clarified that testing equipment used during the manufacturing process is exempt from sales tax. This exemption applies to equipment used to test products before they are completed, such as before packaging and labeling.

However, testing equipment used on finished products remains subject to sales tax. Additionally, equipment used solely for administrative purposes, rather than direct production, is not eligible for the exemption.

A recent case involving a Virginia electronics manufacturer underscores the importance of detailed record-keeping. By proving that their testing equipment was critical to the manufacturing process, the company successfully claimed a sales tax refund.

Please note that this is only an overview. For specific guidance, connect with our sales and use tax team here.

Ruling of Commissioner, P.D. 24-69, Virginia Department of Taxation, July 9, 2024