What was the main issue in the Indiana DOR ruling?

The main issue was whether a subsidiary performing logistics, packaging, and shipping qualified as an industrial processor or manufacturer eligible for tax exemptions.

What did the Indiana Department of Revenue decide in this case?

The Indiana DOR ruled that the subsidiary’s activities were fulfillment services, not manufacturing, making its non-returnable materials and machinery taxable under sales and use tax laws.

Why did the company believe it was eligible for a tax exemption?

The company argued that its assembly and packaging operations transformed customer products, qualifying it for manufacturing-related tax exemptions.

How did the Indiana DOR define fulfillment services in this case?

The DOR defined fulfillment services as activities centered on storage, packaging, and shipping rather than transforming goods through production or industrial processing.

What is the impact of this ruling on similar companies in Indiana?

The ruling clarifies that logistics and fulfillment companies cannot claim industrial processing exemptions unless their operations directly involve producing tangible goods.

What broader lesson does this case highlight for taxable persons?

The case emphasizes the need for businesses to assess their operations carefully before applying tax exemptions, as interpretations of manufacturing activities can vary under sales and use tax laws.

Indiana Denies Tax Exemption for Fulfillment Company

In its ruling, listed as Revenue Ruling 2025-04-RST, issued on September 25, 2025, the Indiana Department of Revenue (DOR) addressed an issue of whether the subsidiary’s operations qualified as industrial processing or manufacturing or whether it merely operated as a fulfillment company providing logistics, packaging, and shipping services. The decision directly influences the tax treatment under Indiana’s sales and use tax laws.

Facts of the Case and DORs Decision

The company in question provides services such as supply chain analysis and design, supply chain management, in-plant services, manufacturing services, assembly and packaging, warehousing and order fulfillment, transportation and transportation management, service parts logistics, and reverse logistics. The company argued that it transformed its customers’ products during its operations and therefore should benefit from tax exemptions on non-returnable wrapping materials and machinery and equipment (M&E) used in its services.

In contrast, the DOR concluded that the company’s activities, primarily storing, packaging, and shipping products, do not constitute manufacturing or industrial processing. Consequently, the DOR determined that a subsidiary of a primary logistics provider qualifies as a fulfillment company rather than an industrial processor. As a result, both the non-returnable wrapping materials and the M&E used in the assembly and packaging processes were deemed taxable under Indiana’s sales and use tax laws.

Conclusion

Disputes or differences in the interpretation of sales and use tax rules and regulations between Tax Authorities and taxable persons underscore the importance of considering all the facts before determining the tax treatment.

More specifically, the case reaffirms that, when it comes to sales and use tax, taxable persons must carefully evaluate the nature of their business activities and how those activities relate to taxable or exempt activities. The reasoning and the DORs ruling highlight that fulfillment and logistics operations in Indiana do not qualify for industrial processing exemptions unless they are directly involved in the production of tangible goods.

Source: Deloitte