89-010

Response December 14, 1989

December 14, 1989

XXXXX

Re: Sales Tax Exemption - Dry Kiln

Dear XXXXX

This letter is in response to your December 4, 1989, request for a Tax Commission ruling on whether your dehumidifying dry kiln qualifies for exemption from sales tax under §59-12-104(16) and Sales Tax Rule R865-19-85S.

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. The heating and other equipment is manufacturing machinery eligible for exemption. This is a new process for you, therefore, it is not replacement machinery.

2. The metal building, even though specially constructed and essential to the process, is real property and does not qualify for exemption.

3. If tax on the eligible equipment was paid directly to the Tax Commission, either on your own sales tax return or in an audit, you may present copies of purchase invoices and indicate how the tax was paid, directly to the Auditing Divisions' XXXXX, who will initiate the refund. If tax was paid to a vendor, you must issue a sales tax exemption certificate and request the refund from the vendor. This must be done prior to January 31, 1990.

Based on 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

December 4, 1989

Utah State Tax Commission

Attn: XXXXX

160 East 300 South

Salt Lake City, UT 84134

Gentlemen:

We were recently audited by XXXXX and XXXXX, Field Auditors, of the XXXXX Office.

We were advised that certain projects we have completed during the past few years may be tax exempt under the Manufacturing Exemption Code Section 59-12-104.

In order to be timely and stay within the three year statute of limitations, we would like to request with this letter a declaratory judgement for the project we completed last quarter of 1986.

Following is a description of a Dehumidifying Dry Kiln installed October 16, 1986.

This type of lumber drying process is the second one installed at our plant in XXXXX. Historically, we have air dried green lumber in order to season it. The dehumidifiers allow us to dry the green lumber in only a few days whereby air drying can take several months.

The kilns are constructed in a manner that allows them to maintain high temperatures up to 160 degrees. The building is of metal construction with vents and reversible fans. Walls are insulated with Styrofoam, a vapor barrier then a marine plywood coated with fiberglass. The construction of the kiln building is very important to the overall performance.

Total Sales Tax Paid - $$$$$

We believe this project falls under the exempt status set forth.

Please contact myself at XXXXX or Corporate Tax Accountant, XXXXX at XXXXX for any additional information.

Your consideration is very much appreciated in this matter.

Sincerely,

XXXXX

General Manager