BEFORE THE STATE TAX
COMMISSION OF UTAH
_____________________________________
XXXXX
Petitioner, : FINDINGS OF FACT,
v. : CONCLUSIONS OF LAW
: AND FINAL
DECISION
AUDITING
DIVISION OF THE :
UTAH STATE TAX COMMISSION, : Appeal
No. 87-2023
Respondent. :
_____________________________________
STATEMENT OF CASE
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
FINDINGS OF FACT
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
CONCLUSIONS OF LAW
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.
FINAL DECISION
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.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner