93-2183
Sales
Signed 4/5/95
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 R861-1-5A(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 R861-1-5A(P) and Utah Code Ann. ''59-1-601(1), 63-46b-13(1), 63-46-14(3)(a).)
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