In the recent case Concrete Industries, Inc. v. Nebraska Department of Revenue, the Nebraska Supreme Court considered whether the purchase of parts which were assembled into manufacturing machinery and equipment were exempt from Nebraska sales and use tax under the manufacturing machinery and equipment exemption. The Department of Revenue had previously ruled that such parts were not exempt (Rev. Rul. 1-05-1 and 1-06-6).
The Nebraska Supreme Court overruled the Department, finding that the sale of items that are assembled to make manufacturing machinery and equipment were exempt from Nebraska sales and use taxes. The Court stated: “We must assume the Legislature intended a sensible rather than absurd result in enacting a statute. And it would make very little sense to exempt assembled machinery from sales and use taxes, and to exempt each and every part of that machinery from sales and use taxes if it is purchased to replace an original part, but to impose a tax on the purchase of the same parts when they are purchased to assemble the machinery in the first place.”
In light of this decision, tax practitioners should consider the sections of Rev. Rul. 1-05-1 and 1-06-6 which contradict this decision to be overruled and no longer applicable.