BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
: FINDINGS
OF FACT,
Petitioner, : CONCLUSIONS OF LAW,
: AND FINAL
DECISION
v. :
:
AUDITING
DIVISION OF THE : Appeal No. 89-1026
UTAH STATE TAX COMMISSION, :
: Respondent.
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for a formal hearing on
XXXXX. Paul F. Iwasaki, Presiding
Officer, and Joe B. Pacheco, Commissioner, heard the matter for and on behalf
of the Commission. Present and
representing the Petitioner was XXXXX.
Present and representing the Respondent was XXXXX, Assistant Attorney
General.
Based
upon the evidence and testimony presented at the hearing, the Tax Commission
hereby makes its:
FINDINGS OF FACT
1.
Prior to XXXXX, the Petitioner was an auxiliary branch of the XXXXX. It was initially formed as a partnership
engaged in the manufacture of bee boxes and the raising of bees for money.
2.
In XXXXX, the XXXXX severed its affiliation with the Petitioner.
The
Petitioner was then reorganized as a new, independent corporation.
3.
The members of XXXXX are also members of the XXXXX, however, not all members of
the XXXXX are members of XXXXX.
4.
Although one of the avowed purposes of the Petitioner is to further the
teachings of the XXXXX, the Petitioner is not a ministry recognized by any
conference of the XXXXX, nor is it controlled by any conference.
5.
Weekly prayer meetings are conducted by the Petitioner's president, who is a
retired XXXXX minister. Those services
are conducted for the benefit and convenience of the Petitioner's members and
are conducted independently of any control, direction or sanction of any
recognized ministry of the XXXXX.
6.
In addition to providing weekly prayer services, the Petitioner occasionally
provides advice to those interested in stopping cigarette smoking and
occasionally provides instructions in cooking, and arts and crafts to
individuals.
7.
The Petitioner has, on occasion, provided room and board to those in need. In exchange for such help, those individuals
have provided the Petitioner with some service or labor.
8.
The Petitioner requested a sales tax exemption certificate from the Auditing
Division of the Utah State Tax Commission on the grounds that it was an
"educational, charitable, or religious organization." That request was denied by the Auditing
Division.
9.
The Petitioner has received an advance ruling from the IRS granting it a federal
income tax exemption under §501(c)(3) of the Internal Revenue Code.
CONCLUSIONS OF LAW
Sales
made to or by religious or charitable institutions in the conduct of their
regular religious or charitable functions and activities are exempt from sales
and use taxes. (Utah Code Ann.
§59-12-104(8).)
DECISION AND ORDER
In
the present case, the Petitioner claims it is exempt from sales and use tax
because it is an educational, religious, or charitable institution.
Utah
statute does not recognize educational institutions to be exempt from sales tax
solely on the basis of their being an educational institution. Therefore, the
Petitioner's first basis for a sales tax exemption does not exist. It must, therefore, be determined whether or
not the Petitioner is a religious or charitable institution.
The
evidence presented at the hearing showed that the Petitioner is not a
recognized ministry of the XXXXX, nor any other organized religious
institution. The Petitioner claimed
that in its opinion it had met the standards set by the XXXXX as an independent
ministry, however, it is clear from the testimony that the XXXXX has not
recognized it as such. There was
testimony that such recognition would be forthcoming, however, as of the date
of the hearing, that had not occurred.
The
Petitioner then attempted to characterize its weekly prayer meetings and Sunday
services, which were conducted by a retired minister of the XXXXX, as religious
activities sufficient to constitute a religious institution. Again, from the testimony, it was clear that
those services were held for the convenience of some of the Petitioner's
members who were unable to attend the regular services at the XXXXX. It was also clear from the testimony and
evidence that such services were conducted without the approval or direction of
the XXXXX.
The
Tax Commission finds that from the evidence presented, the Petitioner is not a
religious institution within the meaning of Utah Code Ann. §59-12-104(8). Although its members may all be members of
the XXXXX, and although it may have been founded to further the teachings of
the XXXXX, it is not recognized by the XXXXX of the XXXXX as an independent
ministry, and aside from the common membership, has no affiliation with the
local XXXXX. Nor is the fact that the
Petitioner conducts weekly prayer meetings and services for its membership
sufficient to convert the Petitioner from a business organization into a
religious institution for purpose of the Sales Tax Act.
In
arguing that it is a charitable institution, the Petitioner provided the
Commission with a few examples of instances in which it helped some families in
need by providing them with food and shelter.
Again,
the Commission is not persuaded that those isolated instances of providing aid
to some individuals necessarily transforms the Petitioner into a charitable
institution for at least two reasons: 1) the providing of charity by the
Petitioner was not generally available to the public as a whole and appeared to
be limited to those individuals who are members of their organization; and 2)
the providing of the benefit to those individuals was not done without the
expectation of gain. Specifically, the
Petitioner's witness testified that those people who had been given some
benefit by the Petitioner had provided some service in exchange for their
living quarters and food. Therefore, the Commission finds that the Petitioner
was not a charitable institution within the meaning of the Sales Tax Act.
With
regard to both claims that it is a religious or a charitable organization
entitled to a sales tax exemption, the Petitioner claims that it has received a
§501(c) exemption from income tax from the IRS.
The
Commission notes that the Petitioner has received an advance ruling from the
IRS to that effect, but also notes that such a ruling is conditional and
temporary and is not a final determination by the IRS. Therefore, the
Commission does not find that the conditional status granted by the IRS in this
case is sufficient in and of itself to transform the Petitioner into something
that it is not.
Based
upon the foregoing, the Tax Commission affirms the determination of the
Auditing Division in denying the Petitioner's request for a sales tax exemption
certificate. It is so ordered.
DATED
this 27th day of September, 1990.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner