89-1026 - Sales








v. :




: Respondent.



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:


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.


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).)


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.


R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco G. Blaine Davis

Commissioner Commissioner