88-0465

Sales

Signed 11/9/88

BEFORE THE STATE TAX COMMISSION OF UTAH

_____________________________________

XXXXX,

)

Petitioner, ) FINDINGS OF FACTS,

) CONCLUSIONS OF LAW

v. ) AND FINALD DECISION

AUDITING DIVISION OF THE ) Appeal No. 88-0465

UTAH STATE TAX COMMISSION, )

)

Respondent. )

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a formal hearing pursuant to the Rules of Administrative Procedure and the Administrative Procedure's Act on XXXXX. James E. Harward, Presiding Officer, heard the matter for and in behalf of the Tax Commission. XXXXX and XXXXX appeared representing the Petitioner. XXXXX, XXXXX and XXXXX appeared representing the Respondent.

This matter initially started as a prehearing conference on the above date but was converted by the presiding officer to a formal hearing for the purposes of taking evidence and arguments on the issues involved. The Tax Commission, after reviewing the evidence and arguments and the recommendation of the presiding officer makes its:

FINDINGS OF FACT

1. The tax in question is the sales tax.

2. The period in question is XXXXX through XXXXX.

3. During this period of time two pieces of equipment were purchased on XXXXX and XXXXX.

4. Petitioner claims that the purchase of the pieces of equipment are exempt under Utah Code Ann. ' 59‑12‑104(16) as purchases of machinery and equipment for new and expanding operations.

5. The new equipment was used for the expansion of the operation and to take over functions of existing machinery which could not perform to the speed and technical specifications of the existing equipment.

6. The existing equipment was retained to perform odd functions and to serve as backup units.

7. The new equipment purchased did the same thing as the old equipment but did it better and faster.

CONCLUSIONS OF LAW

1. Utah Code Ann. ' 59‑12‑104(16) provides an exemption for sales tax for machinery purchased for new and expanding operations.

2. The exemption does not apply to normal operating replacements. Utah Code Ann. ' 59‑‑12‑104(16). Rule R865‑85S‑l further defines and clarifies the exemption. Normal operating replacements is defined in subparagraph 6 as

"machinery or equipment which replaces existing machinery or equipment of a similar nature, even if the use results in increased production or capacity."

Subparagraph b goes on further

"If existing machinery or equipment is kept for backup or infrequent use; new, similar machinery purchased would be considered as replacement and is not considered exempt."

DECISION AND ORDER

Based upon the foregoing, it is the decision and order of the Utah State Tax Commission that the machinery and equipment which is the subject of this appeal is in the nature of normal operating replacements as defined in Rule R865‑85S‑6. Therefore Petitioner's request is denied and the determination of the Auditing Division is affirmed.

DATED this 9 day of November, 1988.

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

NOTICE: You have ten (10) days after the date of the final order to file a request for reconsideration or thirty (30) days after the date of final order to file in Supreme Court a petition for judicial review. Utah Code Ann. '' 63‑46b‑13(1), 63‑46b‑14(2)(a).

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