Sales and Use

Signed 5/5/95







Petitioner, : ORDER


v. :




: Account No. XXXXX


Respondent. : Tax Type: Sales and Use



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.


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.


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.


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).)