May 1, 2007
FOR IMMEDIATE RELEASE
Court of Appeals of Georgia Exempts Repair and Replacement Parts Used Directly in Manufacturing.
The Court of Appeals of Georgia (“Court of Appeals”) reversed the trial court’s decision
and ruled in favor of Owens Corning in Owens Corning v. Georgia Department of Revenue.
In Owens Corning v. Georgia Department of Revenue (April 20, 2007), the Court of Appeals
determined that purchases of repair and replacement parts for manufacturing machinery were
exempt pursuant to the 1997 version of OCGA § 48-8-34(A), which provided a sales tax exemption
for “[m]achinery, including components thereof, which is used directly in the manufacture of
tangible personal property when the machinery is bought to replace or upgrade machinery in a
manufacturing plant presently existing in this state. . .”
Owens Corning filed a claim with the Georgia Department of Revenue (“Department”) seeking a
refund for sales tax it paid on purchases of replacement and repair parts for manufacturing
machinery during the period July 1, 1997 through December 31, 1999. After the Department failed
to issue a ruling on its claim, Owens Corning filed an action for a refund of sales and use tax
pursuant to OCGA § 48-2-35 against the Department in the Superior Court of Fulton County.
The trial court rejected Owens Corning’s claim and found the 1997 version of OCGA § 48-8-34(A) did
not exempt from taxation components purchased to repair or replace existing machinery parts because
this Court held, in Inland Paperboard & c. v. Georgia Dept. of Revenue, 274 Ga.App. 101 (616 S.E.2d 873)
(2005), that repair and replacement parts were exempted for the first time in the 2000 amendment to the
Exemption Statute. Further, citing the caption to the 2000 amendment, Ga. L.2000, p. 615 (caption),
the trial court concluded that the exemption contained in the 1997 version of the statute “extended
only to machinery components purchased to upgrade manufacturing machinery.”
The Court of Appeals’ decision addressed the Inland case by stating the following: “But the
Court in Inland only compared the 1994 version of the statute with prior versions of the statute
and with the 2000 version; it did not consider or address the effect of the 1997 amendment. Thus,
we do not find Inland to be controlling here. It is plain to us that notwithstanding the changes made
in the 2000 version of the statute, which will be considered more fully below, the 1997 version expanded
the definition of machinery by including within that definition ‘components thereof.’ The language used
is plain, and on its face susceptible to just one interpretation—to provide for a sales and use taxation
exemption for ‘[m]achinery, including components thereof. . . when the machinery is bought to replace or
upgrade machinery. . .’ ” Ga. L.1997, p. 1413, § 1.
Based on the foregoing, the Court of Appeals concluded that Owens Corning, not the Department, was
entitled to summary judgment on its claim for a refund of sales tax during the applicable period.
The trial court’s order granting the Department’s motion for summary judgment and denying Owens Corning’s
motion for summary judgment was thus reversed.
Opportunity
The Department filed a Notice of Intent to file a Certiorari Petition with the Georgia Supreme Court to
appeal this further. The Department’s petition is due May 10, 2007. This is a tremendous win for Owens
Corning and other clients with manufacturing operations in the state. Note: this issue only applies for
the period July 1, 1997 through December 31, 2000.
If you have any questions regarding the above information, please contact Ms. Ginny Buckner Kissling,
Principal, of the Ryan & Company Dallas office, at 972.934.0022.
Ms. Kissling can also be reached via e-mail.
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