87-2023 - Sales




            Petitioner,                                                         :           FINDINGS OF FACT,

v.                                                                                 :           CONCLUSIONS OF LAW

                                                                                    :           AND FINAL DECISION

AUDITING DIVISION OF THE                                :

            UTAH STATE TAX COMMISSION,            :           Appeal No. 87-2023

            Respondent.                                                     :



            This matter came on before the Utah State Tax Commission for a formal hearing on XXXXX.  G. Blaine Davis, Commissioner conducted the proceedings.  XXXXX, Assistant Attorney General, appeared for and in behalf of the Respondent, and XXXXX appeared for and in behalf of the Petitioner.

            It was the position of the Petitioner that it was entitled to have a sales tax exemption number issued to it so that it could purchase and sell items free from the imposition of sales or use tax.  It was the position of the Respondent that the Petitioner did not qualify for a sales tax exemption number and could not purchase or sell items without paying the required sales or use tax.

            After reviewing the evidence and arguments presented by each of the parties at the formal hearing the Tax Commission hereby makes its


            1. Petitioner, XXXXX, is a Utah non-profit Corporation.  The XXXXX was first organized in XXXXX, but it was not organized as a Utah Corporation until Articles of Incorporation were filed on XXXXX.  Article III of the Articles of Incorporation refers to the purposes for which the corporation was formed, to-wit: charitable, social, fraternal, civic, patriotic, historical and educational.

            2. A letter from the Adjutant General of the Veterans of Foreign Wars of the United States indicated that said organization, which is the parent organization and the national body to which Petitioner belongs, is a corporation chartered by Congress in XXXXX for fraternal, patriotic, historical and educational purposes.  It does not list charitable as one of its purposes.

            3. Petitioner's Application for a Sales Tax Exemption Number for Religious and Charitable Institutions, at paragraph VII states that the Corporation was formed for fraternal, patriotic, historical, and educational purposes, and does not even allege that Petitioner is charitable.

            4. The Petitioner receives funds from membership dues, contributions from members, contributions from the public, XXXXX program, and the sale of XXXXX logo tee shirts and hats.

            5. Petitioner's Financial Statement for the period beginning XXXXX and ending XXXXX was received into evidence.  That Financial Statement shows total receipts for the period which totaled $$$$$, with charitable outlays during the period totaling $$$$$, or %%%%% of receipts.  Those financial statements do not reflect any income from contributions from the public except for "XXXXX sales."

            6. Based on the expenditures of funds set forth in those financial statements, a tax exemption certificate would have saved the Petitioner less than $$$$$ for the total period of nearly three years.

            7. Petitioner conducts monthly meetings and undertakes various activities of a charitable and/or public service nature, including XXXXX.

            8. Of the total amount of Petitioner's receipts, a significant amount of approximately %%%%% of total receipts or %%%%% of dues received is remitted to XXXXX to sustain Petitioner's charter and secure membership in the XXXXX.  Testimony was given that the XXXXX is a XXXXX organization concerned with XXXXX affairs which provides information on pending legislation to its members as well as performing a lobbying function before Congress on veterans issues.

            9. Testimony was offered that sales tax exemptions had been received by other XXXXX, but those other XXXXX were engaged in dispensing beverages and food.  The exemptions granted to those other XXXXX were not exemptions for sales made to or by charitable organizations, which was the exemption for which Petitioner was applying, but were "resale exemptions" which are granted to permit those other Posts to acquire items free of sales tax if those items are to be resold and sales tax then collected on the resale of those items.

            10. Petitioner does not dispense food, beverages or any other tangible personal property.

            11. The type of exemption certificate for which Petitioner has applied has not been issued to any other XXXXX.

            12. Only XXXXX and their families can be beneficiaries of any of the benefits of the XXXXX.  Based upon the foregoing Findings of Fact, the Commission enters its


            1. Petitioner is not a charitable institution within the meaning of Section 59-12-104(8) Utah Code Annotated, 1953, as amended and R86-37S(b) Administrative Rules of the Utah State Tax Commission.

            2. Although Petitioner participates in many worthwhile and beneficial activities, Petitioner did not satisfy it's burden of proof to demonstrate that it was a charitable institution within the meaning of the statute granting the exemption.

            3. The exemptions granted to other XXXXX were not exemptions for sales made to or by charitable organizations, which was the exemption for which Petitioner was applying, but were "resale exemptions" which are granted to permit these other Posts to acquire items free of sales tax if those items are to be resold and sales tax then collected and remitted on the resale of those items.

            4. The Commission must strictly construe exemptions against the taxpayer and a strict reading of this exemption does not permit an organization which is organized to conduct social, fraternal, civic, patriotic, educational, and lobbying functions to be exempted from the payment of sales tax for its purchases as a charitable organization.

            5. Petitioner's charitable activities do not constitute a sufficiently charitable focus to come within the exemption granted by Section 59-12-104(f), Utah Code Annotated, 1953, as amended.

            6. There are too many non-charitable activities and there is not a sufficient public benefit contribution to the common good or public welfare, or gift or benefit to the public for Petitioner to be construed as a charitable organization.

            7. The courts have consistently held that XXXXX organizations are not charitable.  Department of XXXXX of the United States vs. Division of Employment Security, Department of Labor and Industrial Relations of Missouri, 517 S.W. 2nd 837, and Department of California, XXXXX vs. Kuny, 269 P. 2nd 882.


            Therefore, it is hereby ordered that the decision of the Auditing Division denying Petitioner's application for sales tax exemption as a charitable institution be affirmed, and Petitioner's application for a sales tax exemption certificate as a charitable organization is hereby denied.

            DATED this 13 day of April, 1989.


R. H. Hansen                                                                Roger O. Tew

Chairman                                                                      Commissioner

Joe B. Pacheco                                                            G. Blaine Davis

Commissioner   Commissioner