Safety gear employees use in production would seem to be non-taxable under most states’ manufacturing exemptions.

But in Indiana, a company got caught up in a loophole — and ended up having to pay taxes on the equipment.

The problem: The company, an auto exhaust systems manufacturer, purchased steel-toe boots for its line workers and claimed them as an exempt item. Might have worked, but the company actually sold them to the workers at a reduced cost, instead of just supplying them for free.

That turned the boots into a benefit — and in the DOR’s eyes, a taxable use.

Now the company will have to pay taxes and on the entire cost of the boots.

Tags: Exemption, Penalties, Sales tax