91-1388 - Sales







v. :



Respondent. :



This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Paul F. Iwasaki, Presiding Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner as XXXXX. Present and representing the Respondent was XXXXX, Assistant Utah Attorney General.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:


1. The tax in question is sales tax.

2. The audit period in question is XXXXX through XXXXX.

3. The Petitioner operates a meat processing plant which produces ground beef and pork patties for sales to XXXXX. The patties are made from bulk meat which is supplied to the Petitioner from other sources.

4. In the process of producing the patties, liquid nitrogen is sprayed onto the patties to flash freeze them to a very low temperature. The patties are then packed in containers and placed in cold storage to maintain their hard frozen condition while awaiting shipment in refrigerated vehicles to XXXXX.

5. The freezing process is used to preserve the uniformity, freshness, quality and purity of the patties and also acts as a retardant to spoilage.

6. During the audit period in question, the Petitioner purchased its liquid nitrogen from its vendors and did so without paying sales tax on the purchase price. The Petitioner maintained that the use of liquid nitrogen constituted a "spray" used in the production of animal products and thus was exempt from taxation as provided for by Utah Code Ann. 59-12-104(20).


Sprays and insecticides used to control insects, diseases, and weeds for commercial production of fruits, vegetables, feeds, seeds, and animal products are exempt from sales tax. (Utah Code Ann. 59-12-104(20)).

There is levied a tax on the purchaser for the amount paid or charged for the following: . . . (1) tangible personal property stored, used, or consumed in the state. (Utah Code Ann. 59-12-103(1)(1)).


In the present case, the issue before the Commission is whether the purchases of the liquid nitrogen were, as the petitioner alleges, exempt from the imposition of sales tax. The Petitioner argues that the purchases of the liquid nitrogen constituted purchases of sprays used to control diseases for the commercial production of animal products and thus are exempt from sales tax as provided for by59-12-104(20) Utah Code Ann.

For an item of tangible personal property to be exempt from sales tax under59-12-104(20), several requirements must first be met. The item must be: 1) a spray or insecticide; 2) used to control a disease; and 3) must be used in the commercial production of animal products.

With respect to the first requirement, that the item of personal property in question be "sprays", the Petitioner argued that the word is used without specific limitation and is therefore all inclusive so as to include all sprays administered.

The Respondent argued that the liquid nitrogen was not exempt from sales tax because:

1. The liquid nitrogen did not become a component part or ingredient of the meat patty, and;

2. The Petitioner was not engaged in the "commercial production" of animal products as that term is used in the statute.

Under the facts of the present case, the Tax Commission finds that the liquid nitrogen purchased by the Petitioner was not exempt from sales tax, not necessarily for the arguments set forth by the Respondent but rather, because the liquid nitrogen did not constitute a "spray" within the meaning of59-12-104(20).

By arguing that the word "sprays" is all inclusive and without limitation, the Petitioner has, essentially, taken each word in subsection 20 and applied a definition to each of those words without regard to the context in which the words are used.

By reading each of the words set forth in subsection 20 and defining them, not within the context of which they are used, but singularly and standing alone, one might arrive at the interpretation the Petitioner argues for. To do so however, violates the rule of statutory construction set forth by the Utah Supreme Court in Morton International, Inc. v. Auditing Division of the Utah State Tax Commission, 814 P.2d 581 (Utah 1991). There, the Utah Supreme Court stated that the rule of noscitur a sociis, "provides that the meaning of questionable words and phrases in a statute be ascertained by reference to the words or phrases associated with them."

When applying that rule of statutory construction to the present case, it becomes clear that the word "sprays" is meant to be a substance which is used in the same manner as an insecticide or herbicide which may be applied to agricultural or animal products to prevent or destroy diseases. Here, the liquid nitrogen is not an insecticide nor herbicide and the only reason it would qualify under the exemption as proposed by the Petitioner is that it is sprayed upon the meat patties.

In addition to the above, the Tax Commission is not convinced that the liquid nitrogen spray applied in the present case is used to control a "disease" as is contemplated by 59-12-104(20). Admittedly, the liquid nitrogen, when used to freeze the meat patties, helps to prevent and retard the growth of bacterial micro-organisms which lead to spoilage. This natural process of spoilage however does not constitute a "disease" as contemplated under the statute. As used in the statute, the word "diseases", implies an external force such as infection, that creates an abnormal impairment of a plant or animal's normal functions. It does not imply the natural decay of agricultural or animal products.

Based upon the foregoing, the Tax Commission finds that the liquid nitrogen as purchased and used by the Petitioner does not constitute a purchase of a "spray" within the meaning of Utah Code Ann. 59-12-104(20), and therefore, is not exempt from the imposition of sales tax. Therefore, the determination of the Auditing Division is affirmed. It is so ordered.

DATED this 28 day of October, 1992.



R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco S. Blaine Willes

Commissioner Commissioner