In a case that I was involved with as a consultant at the audit level, the Michigan Court of Appeals has allowed a landfill owner and operator to claim the industrial processing exemption from the Michigan sales tax and use tax.  [Granger Land Development Co. v. Department of Treasury, Michigan Court of Appeals, Docket No. 286355, December 29, 2009]

In Granger, property and equipment used by a landfill operator to erect cells in which it deposits waste for the production of methane gas for sale, qualify for exemption from Michigan use tax because the property is used in industrial processing.  Though the Department of Treasury contended that the personal property used to erect and maintain the cells was affixed to the real property, the taxpayer did not attach the cells to the underlying real property and affirmatively insulated the real property from the waste.  Further, the cells were not established to improve the land but to facilitate the processing of waste material.  The cells were not intended to be a permanent accession to real estate because the fact that the processing of the raw materials occurs in the same location that the eventual disposal of leftover materials might occur does not mean that the materials in the cells become part of the real estate during the processing period.  The heavy equipment used by the taxpayer is also exempt because it is used to transport the waste and to erect the cells and therefore is used in the industrial processing of the waste.