93-2183
Sales and Use
Signed 5/5/95
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
XXXXX, )
:
Petitioner, : ORDER
:
v. :
:
AUDITING
DIVISION OF THE : Appeal No. 93-2183
UTAH STATE TAX COMMISSION :
: Account
No. XXXXX
:
Respondent. : Tax Type: Sales and Use
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission upon a Petition for
Reconsideration, dated XXXXX, filed by Respondent as a result of the
Commission's final decision dated XXXXX.
In
the Petition for Reconsideration, Respondent makes three primary objections to
the Commission decision. Respondent
contends that the Commission applied the wrong standard of review, failed to
follow the standards set forth in the Standard Industrial Code manual, and made
conclusions which were not supported by the facts and evidence presented.
With
regard to the position of Respondent relating to the alleged implementation of
the wrong standard of review, the Respondent reiterates the standard that the
party seeking to establish tax exemptions bears the burden of establishing that
it clearly falls within the scope of those exemptions. The Respondent has accurately stated the
law, but does not recognize that the Commission determined that Petitioner did
in fact meet the burden of proof and established that it fell within the scope
of the exemption.
The
Respondent also alleges that the Commission failed to follow the standards set
forth in the Standard Industrial Code manual, primarily because it contends
that "the testimony clearly established that the overwhelming majority of
XXXXX business is associated simply with breaking bulk which the Commission has
recognized fits squarely within the wholesale section of the S.I.C. code, not
the manufacturing section."
However, contrary to the representations of Respondent, the testimony
did not clearly establish that fact. In
fact, Respondent did not submit any evidence as to how much of the business, if
any, was simply breaking bulk. Further,
the Respondent does not site any authority or decision of the Commission
wherein it recognizes that breaking bulk is merely wholesale. To the contrary, the Petitioner submitted
evidence indicating that 85% of the product going through the business went
through the manufacturing process of refrigeration, cooling, proper timing,
adding chemicals and flavoring, cutting, and vacuum-packaging the product. The Commission's determination was that all
of those processes constituted the manufacturing process. The decision of the Commission recognized
that there were some non-manufacturing activities and functions which occurred
at the facility, but the Commission determined that the primary activity was a
manufacturing activity. The Standard
Industrial Classification manual recognizes that more than one type of activity
may occur at a location. Respondent
further cites that the portion of the decision which states, "Petitioner
starts with cheese curd and processes it to the various products by its control
of time, temperature, and additives."
Respondent than argues that, "that finding is not supported by the
factual testimony that 75% of what Petitioner processes does not begin as
cheese curd but as semi-finished cheese or cheese that has already been
manufactured and aged." The
arguments of Respondent are not consistent with the testimony. Again, Respondent did not present evidence
of such an allegation, and it fails to recognize that whether or not a product
is manufactured does not depend upon the beginning stage of the product, but
instead depends upon the processes that take place on that beginning product
prior to the time it is finished and ready for sale to the consumer. In this case, the uncontroverted evidence
was that 85% of the products of Petitioner went through a process wherein time,
temperature and additives were carefully controlled, and it then went through
the further process of cutting or shredding and packaging. The decision of the Commission is that those
processes constituted the manufacturing process.
The
final argument of Respondent was that the power (electricity) used in the
warehouse and coolers were for commercial
purposes. Having determined that
cooling and the control of temperature is part of the manufacturing process, it
necessarily follows that the electricity used to refrigerate and cool the
products is used in the manufacturing process, and therefore the predominant
use of such electricity was for manufacturing purposes and not commercial
purposes.
APPLICABLE LAW
Utah
Administrative Rule R861-1A-5(P) provides that a Petition for Reconsideration
"will allege as grounds for reconsideration either a mistake in law or
fact, or the discovery of new evidence."
Under this rule, the Tax Commission may exercise its discretion in
granting or denying a Petition for Reconsideration.
DECISION AND ORDER
Based
upon the foregoing, it is the decision and order of the Utah State Tax
Commission that the Petition for Reconsideration is denied. It is so ordered.
DATED
this 5th day of April, 1995.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco Alice
Shearer
Commissioner Commissioner
NOTICE: You have thirty (30)
days after the date of a final order to file a.) a Petition for Judicial Review
in the Supreme Court, or b.) a Petition for Judicial Review by trial de novo in
district court. (Utah Administrative
Rule R861-1A-5(P) and Utah Code Ann. §§59-1-601(1),63-46b-13(1),
63-46-14(3)(a).)
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