Response
December 1, 1989
Dear
XXXXX:
I'm
writing in response to your letter of June 2, 1989 asking for a ruling on the
issue of whether facsimile, stocking, wrapping, and labeling equipment
qualifies for exemption from sales tax under Utah statute 59-12-104 (16) .
The
Tax Commission is reviewing your request as well as others. However, we are
taking no action at this time because of some pending matters that must be
considered prior to making a decision on these requests.
I
apologize for the delay. However, your request is being processed, and we will
inform you of the Commission's decision as quickly as possible.
For
the commission,
Joe
B. Pacheco
Commissioner
Request
June
2, 1989
Utah
State Tax Commission
Heber
M. Wells Building
160
East 300 South
Salt
Lake City, UT 84134
RE:
XXXXX Request for Declaratory Judgement
Gentlemen:
Please
accept this letter as the taxpayer's request for declaratory judgement under
Rule R865-85S(B)(6). The taxpayer believes that equipment purchased and used in
Utah to produce the newspaper XXXXX is qualified for exclusion under Sec.
59-12-104(16) as new or expanded manufacturing operations.
Section
59-12-104(16) provides an exemption for:
(16)sales
or leases of machinery and equipment purchased or leased by a manufacturer for
use in new or expanding operations (excluding normal operating replacements,
which includes replacement machinery and equipment even though they may
increase plant production or capacity, as determined by the commission) in any
manufacturing facility in Utah. Normal operating replacements shall include
replacement machinery and equipment which increases plant production or
capacity. Manufacturing facility means an establishment described in SIC Codes
2000 to 3999 of the Standard Industrial Classification Manual 1972, of the
federal executive Office of the President, Office of Management and Budget.
Rule
R865-85S defines machinery, equipment, new or expanding operations and
manufacturer as follows:
1.
"Machinery" means electronic or mechanical machines to be
incorporated into a manufacturing or assembling process from the initial stage where
actual processing begins through the completion of the finished end product,
including final processing, finishing or packaging of articles which are for
sale in commerce.
Automated
material handling and storage machinery shall be included in this definition
when such machinery is part of the integrated continuous production cycle.
2.
"Equipment" means any independent device separate from any machinery
but essential to an integrated or continuous manufacturing or assembly process
or any subunit comprising a component of any machinery or auxiliary thereof,
including such items as dies, jigs, patterns, molds, and similar items used in
manufacturing, processing, or assembling. Qualifying equipment also includes
devices necessary to the control or operation of machinery and equipment
qualifying under this rule even though not located in the specific
manufacturing area.
3. New or expanding operations means
manufacturing, processing, or assembling activities which:
(a) are substantially different in nature,
character, or purpose from prior activities;
(b) are begun in a new physical plant location
in Utah; or
(c) increase production or capacity. This
definition is subject to limitations dealing with normal operating replacement.
4. "Manufacturer" means a person who:
(a) functions within the activities included in
SIC code classification 2000-3999;
(b) produces a new, reconditioned or
remanufactured product, article, substance, or commodity from raw,
semi-finished, or used materials; and
(c) in the normal course of business produces
products for sale as tangible personal property.
The
taxpayer publishes the newspaper XXXXX. The page layouts are prepared in XXXXX
and transmitted via satellite to the receiving equipment located in Salt Lake
(facsimile equipment). The taxpayer owns the equipment which reconstructs the
images of the newspaper pages and produces a photographic image of the page
which is used to produce a plate. The plate is produced by XXXXX, an
unaffiliated company which publishes the XXXXX and XXXXX. The presses are owned
by XXXXX as well. The raw newsprint used to print the paper is owned by XXXXX.
The equipment used to stack, wrap and label the newspaper after it is printed
is also owned by XXXXX.
The
taxpayer believes the equipment owned is essential to an integrated
manufacturing process as described in Rule R865-855(2). Furthermore, the
taxpayer began publishing XXXXX in Utah on XXXXX. This was the first time XXXXX
was printed in Utah constituting a "new operation" as defined in Rule
865-85S(3).
XXXXX
is a manufacturer as defined in Rule 865-85S(4) in that it meets all of the
qualifications required.
A) Newspaper publishing is SIC Code 2711.
Within the range 2000-3999
B) XXXXX produces XXXXX using raw newsprint and
the images received via satellite
C) XXXXX is tangible personal property produced
by XXXXX in the normal course of business
Since
the taxpayer is a manufacturer, purchases equipment essential to the integrated
manufacturing process and uses that equipment in a new or expanded operations
in Utah the taxpayer believes that purchases of such equipment qualify
exemption under Section 59-12-104(16).
The
taxpayer requests that the Utah State Tax Commission determine that the
purchase of facsimile equipment, stackers, wrappers and label equipment qualify
for exemption from Utah sales and use tax, under Section 59-12-104(16).
Please
address your reply to:
XXXXX
If
you have any questions, please contact me at the address above or by telephone
at XXXXX.
Very
truly yours,
XXXXX
Manager
of Taxes