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Declaratory Order - CHEP USA

February 11, 2009

The following is a summary of the declaratory order In the Matter of CHEP USA (docket # 08-30-6-0312) signed by the Director on February 11, 2009.

The Petitioner leases pallets to manufacturers who in turn use those pallets to ship their products to various customers referred to by the Petitioner as “distributors.” The Petitioner asked the Director to declare that the sales price of its leases of pallets to the manufacturers be exempted from tax by Code § 423.3-(45), a subsection which exempts from tax sales (including leases) of pallets to manufacturers for use in transporting their products. The Director decided that the leases were exempt from tax on that basis.

The Petitioner also asked the Director to find its leases exempt from tax under §§ 423.3(2) and 423.3(15) of the Code. This the Director refused to do stating that there is no indication in the record that the Petitioner leased the pallets for subsequent resale or that the pallets were in any way used in agricultural production, respectively.

The Director also ruled whether six fees charged by the Petitioner were part of the sales price of its pallet rental, finding that four of the fees were part of that price and two were not.