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B.F. Goodrich Company v. Oldmans Township

A-2998-97T2, 323 N.J. Super. 550, 733 A.2d 1204 (App. Div. 1999)

TAXATION; ASSESSMENTS—Exterior pipes on a building are assessable as part of the real property up to the point that they become part of the actual manufacturing process, even if they transport raw materials to that point.

A property included a manufacturing and warehouse building and a separate office facility together with miscellaneous improvements on the site. Circling the site were pipe racks, piping, and other components used to transport raw materials, steam, and cooling water to a latex plant. The municipal tax assessor included the value of certain exterior piping connected to the manufacturing plant as part of the real property, and the plant owner claimed that this piping was part of the “production process” and therefore nontaxable as business personal property under the Business Retention Act. The Tax Court concluded that the piping was not part of the production process. The Appellate Division held that, for purposes of the Act, the process started inside the manufacturing building and the point of connection was the meter on the fourth floor where the pipes merged and materials were introduced into the latex manufacturing reactors, tanks, and processing equipment. N.J.S. 54:4-1.15 defines “production process” as the “process commencing with the introduction of raw materials or components into a systematic series of manufacturing, assembling, refining or processing operations and ceasing when the product is in the form in which it will be sold to the ultimate consumer.” The taxpayer’s operation involved the chemical processing of raw materials, which are mixed together, heated and cooled, and then piped to blender and mixing tanks all of which are inside the manufacturing building. Eventually, the product emerges in the form of liquid latex and is shipped in drums or tank cars. Each component is transported from the storage tanks to the building in a separate pipe. Therefore, it was clear to the Court that the taxpayer did not want chemical reactions occurring until the raw materials entered the manufacturing plant. Under that analysis, the manufacturing process did not start until the raw materials were delivered to the processing tanks and therefore the piping was held not to be a part of the manufacturing process. Consequently, the piping was part of the real property and was assessable as such.


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