96-0371

Sales and Use

Signed 7/14/97

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

COMPANY C, :

Petitioner, : DECISION

v. :

AUDITING DIVISION OF THE : Appeal No. 96-0371

UTAH STATE TAX COMMISSION, :

: Account No. #####

Respondent. : Tax Type: Sales & Use

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission pursuant to the Administrative Procedures Act and the rules of the Utah State Tax Commission. An initial hearing was held on July 7, 1997. W. Val Oveson, Commission Chair, heard the matter for and on behalf of the Commission. Present and representing Petitioner was PETITIONERS REP.. Present and representing Respondent was Susan Barnum, Assistant Attorney General and Gil Naisbett, Audit Manager.

Based upon the evidence in the file and presented at the hearing, the undersigned makes the following:

FINDINGS

1. The tax in question is sales and use tax.

2. The audit period is April 1, 1992 through March 31, 1995.

3. The items at issue are; a) floor matts used to keep employees off the hard floor and to reduce the static electricity, b) injection molds purchased with the original machines, invoiced with the original machines and used to calibrate the machine prior to production of the injection molding operations.

4. It was stated by Petitioner that all replacement molds used after the machines were in operations were considered taxable.

APPLICABLE LAW

Section 59-12-103 of Utah Code Ann. describes the property that is subject to the sales and use tax if no exemption applies.

(1) There is levied a tax on the purchaser for the amount paid or charged for the following:

(a) retail sales of tangible personal property made within the state;

Section 59-12-104(15) provides an exemption for certain equipment used in the manufacturing process.

The following sales and uses are exempt from the taxes imposed by this chapter:

(15) (a) sales or leases of machinery and equipment purchased or leased by a manufacturer on or after July 1, 1995 for:

(I) use in new or expanding operations related to the manufacturing process in any manufacturing facility in Utah:

(A) manufacturing facility means an establishment described in SIC Codes 2000 to 3999 of the 1987 Standard Industrial Classification Manual, of the federal Executive Office of the President, Office of Management and Budget;

(B) for purposes of this subsection, the commission shall by rule define the terms "new or expanding operations" and "establishment";

(ii) normal operating replacements, which include replacement machinery and equipment in any manufacturing facility in Utah, at the following rate:

(A) for taxable years beginning July 1, 1996, 30% of the exemption shall be allowed;

(B) for taxable years beginning July 1, 1997, 60% of the exemption shall be allowed; and

DECISION AND ORDER

After considering the information presented at the initial hearing the Commission rules as follows:

1. The floor matts are not manufacturing equipment under the definition of the statutes and are therefore not exempt from sales and use tax.

2. The molds used in the process of calibrating a machine prior to production are considered part of the original machine and are exempt from sales and use tax. This decision does not limit a party’s right to a Formal Hearing. If appealed within 30 days from the date of this order a Formal Hearing will be held on September 11, 1997 at 10:00 a.m. However, this Decision will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner’s name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further administrative action or appeal rights in this matter.

DATED this 14 day of JULY, 1997.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

_____________________________

W. Val Oveson

Commissioner

The agency has reviewed this case and the undersigned concur in this decision.

DATED this 14 day of JULY, 1997.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

Richard B. McKeown Joe B. Pacheco Pam Hendrickson

Commissioner Commissioner Commissioner