The Iowa Supreme Court has affirmed a decision by the Iowa Court of Appeals related to the state’s use-tax exemption policy on equipment indirectly used in a manufacturing process. In an opinion issued this morning, the justices concluded that The Sherwin Williams Co. is exempt from paying use tax on color-matching equipment it uses in its Iowa retail stores to determine the precise mix of colorants to add to its paints prior to sale. The Cleveland-based company contended the equipment is exempt because it is integral to the process of adding value to the paint and therefore met the definition of an exempt manufacturing process. The Iowa Department of Revenue argued that the term ‘manufacturer” was ambiguous, and allowing the exemption to be applied to a retail establishment “would produce the absurd result of including as manufacturers restaurants, bars, lemonade stands, and various home-improvement stores.” In the ruling, the justices said “the department’s application of its rule to the facts of this case to reach a conclusion that the color-matching machines are not ‘directly used’ in processing salable paint has no foundation in fact or reason and is, therefore, wholly unjustifiable.’” To view the opinion, click here.