Response December 7, 1989
December 7, 1989
XXXXX
Re: XXXXX Manufacturing Plant Expansion
Dear XXXXX:
This letter is in response to your July 17, 1989 request for a Tax
Commission ruling on whether purchases of machinery from November, 1986 through
March, 1987 to construct an agricultural twine manufacturing plant qualify for
sales tax exemption under Sales Tax Rule R865-19-85S and Code Section
59-12-104(16) and that Petitioner be allowed to receive a refund of tax paid.
You also requested that your planned expansion where approximately $$$$$ will
be spent on new machinery be determined to be tax exempt.
Although your inquiry was framed as a request for declaratory judgment,
Tax Commission policy is to initially treat all such inquiries as requests for
advisory opinions. As such, it was referred to the Tax Commission's Auditing
Division for their analysis and recommendation. The division recommendation is
as follows:
1. You are a qualified manufacturer and
entitled to a refund of sales or use tax paid on the manufacturing machinery to
begin operations in Utah. The exemption applies only to the actual production
machinery. Computers and office equipment does not qualify for exemption, nor
does equipment used in storage, warehousing or distribution.
2. A refund of tax paid to vendors must be requested
from the vendor, who, in turn, takes a credit on his next sales tax return. If
use tax was paid directly to the Tax Commission by XXXXX, a claim for refund
may be submitted to the Tax Commission. In order to receive a refund for
purchases made in November and December of 1986, the claim must be submitted by
January 31, 1990.
3. XXXXX appears to be planning a
qualified plant expansion to increase production by 6,000,000 pounds annually.
They are entitled to purchase production machinery tax-free. A sales tax
exemption certificate should be issued to vendors for the exemption to apply
upon purchase.
Based upon the facts presented in your letter, we are in agreement with
the Auditing Division's recommendations. Obviously, if there are deviations from
these facts, this opinion may be negated.
If you do not agree with this determination, you may appeal to the Tax
Commission for a formal hearing. The results of that hearing would constitute a
declaratory judgment and be appealable to the Utah Supreme Court. A notice of
appeal rights is attached.
For the Commission,
Joe B. Pacheco
Commissioner
July 17, 1989
Utah State Tax Commission
160 East 3rd South
Salt Lake City, Utah 84134-2300
ATTN: XXXXX-Corporate Franchise Tax Auditor
Re: Request of Declaratory Judgement according to Tax Commission Rule
R865-13A to determine whether the expenditures for machinery and equipment
quality for exemption pursuant to Utah Code Annotated Section 59-12-104 for
XXXXX.
Dear XXXXX:
We respectfully request for XXXXX a declaratory judgement to Tax
Commission Rule R865-13A giving exemption from sales tax for purchases and
installation of machinery and equipment in certain manufacturing facilities
pursuant to Utah Code Annotated Section 59-12-104. Circumstances are as
follows:
During the months of November 1986 through March 1987 XXXXX expended
$$$$$ in machinery and equipment to begin operations manufacturing twine for
agricultural purposes. Most of the machinery and equipment were acquired by a
lease-buy back arrangement. Some was acquired without paying sales tax and some
was paid with sales or use tax. We are requesting permission to receive a
refund on the sales/use tax paid on these described acquisitions.
Presently the corporation is in the process of expanding its existing
operations to increase its yearly production from 11,000,000 pounds to
17,000,000 pounds. To do this the expansion costs of new equipment and
machinery is estimated to cost $$$$$. Request is sought to exclude this from
sales and use tax under Tax Commission Rule 861-13A as explained under R865-85S
in the Utah Tax Code.
Please forward this request to the proper authority so we can promptly
receive a response in writing authorizing the exemption from sales and use
taxes as requested above. Thank you.
Sincerely,
XXXXX, CPA