September 2014Published Article

Wisconsin Tax Appeals Commission Addresses A Critical Manufacturing Issue In A Case Involving (What Else?) Cheese

American Property Tax Counsel (APTC) National Property Tax Update – Wisconsin.

In Wisconsin, personal property used during the manufacturing process is exempt from property tax, while personal property used for storage of finished product is not exempt. The question of when the manufacturing process ends and storage begins is thus critical. The Wisconsin Tax Appeals Commission has addressed this question, and the related question of whether the manufacturer itself has any input in determining when the manufacturing process ends, in a case involving the aging of cheese, Selkey, LLC v. Wisconsin Department of Revenue.

The taxpayer in that case was in the business of aging cheese for other cheese manufacturers. The Department of Revenue argued that the manufacturing process ends for each type of cheese as soon as the aging process reaches the earliest point when Federal regulations would permit the cheese to be labeled by someone as that type of cheese. The taxpayer argued that the determination should be based on the totality of circumstances, including the manufacturer’s own determination of when the cheese has aged sufficiently for it to be acceptable as that type of cheese for the manufacturer’s own product line.

In a nonfinal opinion issued to resolve a pretrial dispute, the Tax Appeal Commission sided with the taxpayer, holding that “like wine or bourbon or tobacco or meats, a [cheese] manufacturer is selling a specialized good, one aspect of which is flavor,” and that flavor “is a function of the manufacturer’s decisions on such variables as aging.”  The Commission thus appears to have been persuaded that a manufacturer’s own requirements are relevant to the question of when the manufacturing process ends.

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