Sec. 1. 36 MRSA §1760, sub-§31, as amended by PL 1989, c. 501, Pt. V, §§4 and 5, is repealed and the following enacted in its place:

31.__Machinery and equipment.__Sales of machinery and equipment:

A.__For use by the purchaser directly and primarily in either the production of tangible personal property intended to be sold or leased ultimately for final use or consumption, or in the production of tangible personal property pursuant to a contract with the United States Government or any agency thereof.__This exemption applies even if the purchaser sells the machinery or equipment and leases it back in a sale and leaseback transaction.__This exemption also applies whether the purchaser agrees before or after its purchase of the machinery or equipment to enter into the sale and leaseback transaction, and whether the purchaser's use of the machinery or equipment in production commences before or after the sale and leaseback transaction occurs; and

B.__By a person that uses the machinery or equipment as described in paragraph A to a bank, leasing company or other person as part of a sale and leaseback transaction, whether the use of the machinery or equipment by the original purchaser in production commences before or after the sale and leaseback transaction occurs.

SUMMARY

This provision provides that a manufacturer does not lose the benefit of the sales tax exemption for machinery and equipment used in the production process by entering into a sale and leaseback transaction with a bank, leasing company or other financial service provider. The provision also provides that the exemption also extends to the sale of the machinery or equipment to the bank or leasing company.