OPINION OF THE COURT
Greenblott, J. P.After audit of petitioner’s books and records, respondent issued a notice of determination and demand for payment of sales and use tax due in the amount of $34,220.71, plus penalty and interest of $8,779.42, for the tax periods ending May 31, 1970 through February 28, 1973. The notice of determination was based on purchases made by the petitioner on which it had not paid sales or use taxes.
Petitioner disputes the imposition of tax in three categories: (1) tax on fixed assets purchased for repair purposes, (2) tax on materials and supplies used in the company’s research and development center, and (3) tax on materials purchased to build a sanitary pumping station.
Petitioner is in the business of producing and selling *552paper manufacturing machines. Included in its production of a full paper machine are the design, procurement of materials, castings, fabrications, machining, assembly and shipment. Petitioner also produces spare parts for customers and reconditions paper machine rolls. Petitioner concedes that the saíne machinery is used in the reconditioning and recrowning of customers’ paper rolls as in the production of paper rolls for new machinery. In view of the statutory language in effect during the relevant tax periods, respondent’s determination of deficiencies must be upheld. The machinery and equipment purchased by petitioner were not used directly and exclusively in the production of tangible personal property (Tax Law, § 1115, subd [a], par [12]), since it was used to recondition and recrown old machine rolls as well as manufacture new machines.
Turning to the imposition of tax on materials used for research and development, the examiner testified that the research center was separated from the main offices of the machine shop and foundry. In dispute here is a miniature paper production machine, one tenth the size of the regular machine. The examiner was advised that petitioner used the machine for research and development, for demonstrations and for rental to customers who wanted to test their own paper stock. It is obvious that respondent could properly find that the miniature machine was not used directly and exclusively for research and development, and thus not entitled to the statutory exemption in force during the tax periods in question (Tax Law, § 1115, subd [a], par [10]).
The third contested item is purchases of materials for a sanitary pumping station. Petitioner offered no direct testimony to support its position. Respondent’s examiner testified that the materials and equipment for the pumping station were purchased by petitioner, that the labor was performed by petitioner’s employees and that the station does not treat waste. It is essentially a holding facility pumping both industrial and human waste into the Village of Hudson Falls sewage treatment plant. Petitioner’s manager admitted that the station did not treat industrial or human waste.
The exemption for sewage treatment facilities results from respondent’s interpretation of section 1115 (subd [a], par [12]), which included as production machinery equipment and materials purchased to treat waste from a production process. The rule in construing exemptions in taxing statutes is that: *553"An exemption from taxation 'must clearly appear, and the party claiming it must be able to point to some provision of law plainly giving the exemption’ (People ex rel. Savings Bank of New London v Coleman, 135 NY 231, 234; see Matter of Young v. Bragalini, 3 NY2d 602, 605-606, supra). Indeed, if a statute or regulation authorizing an exemption is found, it will be 'construed against the taxpayer’, although the interpretation should not be so narrow and literal as to defeat its settled purpose”. (Matter of Grace v New York State Tax Comm., 37 NY2d 193, 196.)
Respondent, in construing its own regulation, held that the exemption applied to waste treatment facilities and not to waste transport facilities. In our opinion, this construction is not unreasonable or irrational, and must be upheld (Matter of Howard v Wyman, 28 NY2d 434).
The determination should be confirmed, and the petition dismissed, without costs.