Section 45IAC2.2-5-62. Tangible personal property directly consumed in the rendering of public transportation

   (a) The state gross retail tax shall not apply to the sale, storage, or use of tangible personal property which is directly consumed in the rendering of public transportation of persons or property.

  (b) Definition: Consumed. For purposes of this regulation [45 IAC 2.2], "consumed" means the dissipation or expenditure by combustion, use, or application and shall not mean or include the obsolescence, discarding, disuse, depreciation, damage, wear, or breakage of tangible personal property.

  (c) The exemption provided by this regulation [45 IAC 2.2] is limited to tangible personal property directly consumed in rendering public transportation. For rules governing materials consumed by persons engaged in manufacturing, processing, mining, repairing, and farming and not engaged in rendering public transportation, refer to Regulation 6-2.5-5-5.

  (d) In order to qualify for exemption, the consumption of tangible personal property must be reasonably necessary to the rendering of public transportation.

  (e) The following is a list of items which the department has determined to be reasonably necessary to the rendering of public transportation:

Roadway machinery and equipment;

Caboose and locomotive supplies such as fuses, lanterns, batteries, and flags;

Equipment and items purchased to meet federal requirements;

Tariff publications;

Vehicle used for public transportation;

Communication equipment;

All replacement parts, repair parts, and materials consumed by exempt equipment;

Tools and equipment used to repair and maintain rolling stock and track;

Vehicles used primarily for transportation of maintenance crews;

Items used for repairs and maintenance of such vehicles;

Items used for production of financial matters, insurance, schedules, routes, and rates;

Items used to provide customer stations, handle baggage, sell tickets;

Items used to keep vehicles clean and safe for the passengers;

Machine shop and truck tools;

Equipment related to the construction and operation of terminals;

Directories;

Gas storage facilities;

Caboose and locomotive compliments such as towels, masking tape, powders, cleaners, ice, water coolers, and bottled water;

Cleaning supplies;

Employee uniforms;

Garage supplies.

  (f) The following is a PARTIAL list of items which are not directly used or consumed in the rendering of public transportation and, therefore, are subject to tax:

Promotional expenses, matches, jackets, and promotional items given away to existing or potential customers, advertising to the public, except the printing of schedules and routes;

Sales expenses, sales telephones, and related computer equipment used exclusively for sales activities such as marketing, sales projection, and costing. Such equipment used to handle actual ticket sales (i.e., at the reservation office) or to organize loads and dispatch trucks is exempt;

Office supplies, furniture, equipment, and related items for sales personnel executives, including ground and lawn care, except for grading required for the vehicles directly used in the rendering of public transportation;

Heating and air conditioning for separate, off-site executive headquarters is subject to tax. Heating and air conditioning for reservation area, vehicle maintenance areas, or switching yard control buildings is exempt.

  (g) Pre- and post-transportation activity. The purchase, storage, or use of tangible personal property consumed during activities prior to or subsequent to the rendition of public transportation is subject to tax. For purposes of this regulation [45 IAC 2.2], transportation means the movement, transporting, or carrying of persons or property from one place to another and includes loading and unloading of persons or property into or from transportation vehicles.

  (h) Fuel and lubricants. In general, fuel and lubricants are taxable except fuel and lubricants consumed by exempt transportation vehicles or other tangible personal property directly used in rendering public transportation.

─EXAMPLES─

(1) Fuel consumed by an exempt airplane is exempt from tax.

(2) Gasoline consumed by wreckers or repair vehicles is exempt from tax.

(3) Oil used to lubricate a conveyor system used to load cargo into or on an exempt trailer is exempt from tax.

(4) Fuel oil used to heat a carrier's terminals is exempt from tax.

(5) Fuel used to heat off-site, executive headquarters is taxable.

  (i) Shipping materials. In general, shipping material or supplies are taxable except such shipping materials or supplies directly consumed during the rendition of public transportation.

─EXAMPLES─

(1) Blocking lumber and steel strap purchased by a carrier and used to hold sewer pipe securely in place on a flat bed trailer are exempt from tax.

(2) Routing cards tacked to the sides of railroad cars to expedite the switching of the cars are exempt.

(3) Disposable cardboard lining installed in boxcars to prevent grain from spilling from such cars is exempt from tax.

(4) Packing cases, pads, ropes, and cushions used by a carrier to prevent damage to goods during shipment are exempt from tax.

(5) Ice, salt, and other refrigerants used to preserve perishables during shipment are exempt from tax.

  (j) Other tangible personal property. In general, all other items of tangible personal property are taxable except those items which are directly consumed in rendering public transportation.

─EXAMPLES─

(1) Hydraulic fluids used by dock levelers and fork lift trucks used in loading and unloading exempt vehicles are exempt from tax.

(2) Chemicals used to charge air conditioning units for general temperature control in terminals are exempt from tax.

(3) Materials consumed in printing railroad time tables are exempt under this regulation [45 IAC 2.2].

  (k) Promotional, sales, and other nonoperational activities. Purchase, storage, or use of tangible personal property not directly consumed in rendering public transportation is taxable. Tangible personal property consumed during sales or other nonoperational activities is not directly consumed in rendering public transportation and, therefore, is subject to tax. This category includes, but is not limited to, tangible personal property consumed during any of the following activities: promotional advertising; sales marketing, projection, and costing; heating, air conditioning and ventilation units and equipment for general temperature control of separate, off-site executive headquarters; illumination for separate, off-site executive headquarters; research and development; waste disposal. (Department of State Revenue; Ch. 5, Reg. 6-2.5-5-27(020); filed Dec 1, 1982, 10:35 am: 6 IR 57; filed Aug 6, 1987, 4:30 pm: 10 IR 2640)