Responses
December 17, 1990 and November 19, 1990
December
17, 1990
XXXXX
Re:
Advisory Opinion - XXXXX
Dear
Joe:
This
letter is in response to your recent request for a Tax Commission ruling on
whether the purchase of new conveyers, packaging and wrapping equipment
qualifies for exemption under §59-12-104(16). You have stated that the
equipment was purchased for a new facility at a different location.
Tax
Commission policy is to refer such requests to the division most qualified to
analyze the request and make recommendations concerning it. As such, your
request was referred to the Tax Commission's Auditing Division for their
analysis and recommendations. The divisions' recommendation is as follows:
1.
The purchase of the conveyors, packaging and wrapping are for use in a new
facility at a different location.
2.
The equipment is manufacturing machinery and XXXXX does qualify as a
manufacturer with the correct SIC code.
3.
The equipment does not appear to be replacement equipment.
4.
the purchase has met the necessary tests and does qualify for exemption from
sales or use tax.
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 State Supreme Court. A
Notice of Appeal Rights is attached.
For
the Commission,
Joe
B. Pacheco
Commissioner
XXXXX
Re: Advisory Opinion - Cheese Plant Equipment
Dear
XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether new equipment purchased to rebuild a large portion of the XXXXX which
was destroyed by a fire, qualifies for exemption from sales or use tax under §
59-12-104(16).
The
Tax Commission policy is to refer such requests to the division most qualified
to analyze the request and make recommendations concerning it. As such, your request was referred to the
Tax Commission's Auditing Division for their analysis and recommendations. The division's recommendation is as follows:
1. Sales Tax Rule R865-19-85S, paragraph 3,
defines new or expanding operations to include:
a. operations which are substantially different
in nature, character or purpose;
b. are at a new physical location;
c. increase production or capacity.
Rebuilding
a facility destroyed by a fire does not meet any of the above definitions of
new or expanding operations.
2. Paragraph 6 of the rule defines normal
operating replacements as a machinery or equipment which replaces existing
machinery or equipment of a similar nature, even if the use results in
increased plant production or capacity.
It also states that if the machinery or equipment is purchased within 12
months before or after the retirement from service of the old equipment, it is
considered replacement machinery.
3. The courts have ruled that exemptions should
be narrowly construed. The purchases
for the XXXXX plant do not meet either of the above criteria. The word "normal" cannot be
distinguished from "normal operating replacements." There is nothing in the law or rule which
would distinguish equipment purchased to replace items destroyed by a fire from
equipment which is simply worn out.
In
summary, the machinery and equipment purchased to rebuild the XXXXX plant were
not purchased for a new or expanding operations and the purchases were
replacement. The exemption does not
apply.
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 State Supreme Court. A Notice of
Appeal Rights is attached.
For
the Commission,
Joe
B. Pacheco
Commissioner
TO:
XXXXX
FROM: XXXXX
DATE: October 19, 1990
SUBJECT: Request for Advisory Opinion
XXXXX
has requested a declaratory judgment/advisory opinion on behalf of the XXXXX.
The
XXXXX Plant in Salt Lake County has an exempt status question on conveyors and
packaging equipment.
The
XXXXX plant has a question on the exempt status of some new equipment to
replace items destroyed in a fire.
Please
respond according to the guidelines established by the Commission. Thank you.
Mr.
Joe Pacheco, Commissioner
Utah
State Tax Commission
160
East 300 South
Salt
Lake City, Utah 84134
RE:
Request for Advisory Opinion- Sales/Use Tax on Certain Manufacturing Equipment
Dear
Commissioner Pacheco:
Our
client, XXXXX has two questions regarding application of the manufacturer's
sales/use tax exemption. We will describe the equipment and the circumstances
surrounding its purchase and give our reasons why we feel the exemption
applies. We request that you provide us with an advisory opinion that states
your concurrence or reasons for disagreement.
A. CONVEYORS AND PACKAGING
EQUIPMENT FOR A NEW FACILITY AT THE XXXXX PLANT IN SALT LAKE COUNTY
Prior
to 1987, various fluid division plants would ship product to a Murray
distribution center. There, the various product lines (i.e., juices, milk, ice
cream, etc.) would be sorted, collated, palletized, and prepared for daily
shipments. During 1987, this Murray
location was closed and a new distribution and final packaging facility was
added to the XXXXX fluid production plant in Salt Lake County.
The
new addition to the building houses new conveyors, storage racks for products
awaiting final packaging, and the actual packaging/wrapping equipment to
prepare products for shipment to customers. The move from Murray to the XXXXX
plant and the equipment purchases were necessary to more efficiently handle
current increased production and provide for future growth as projected for the
Company's fluid division.
We
have advised our client that the new packaging equipment and conveyor system
are exempt under the manufacturer's exemption for the following reasons:
The
equipment is being used in a new facility at the XXXXX plant for the Company's
expanding operations.
The
equipment is not normal operating replacements. The old Murray location was
closed and equipment was purchased for a new facility. The new conveyors and
packaging equipment did not replace similar equipment at the XXXXX plant.
B. NEW EQUIPMENT TO REPLACE ITEMS DESTROYED IN
A RECENT FIRE AT THE XXXXX PLANT
A
recent fire destroyed a large portion of the Company's production plant and
production equipment at the XXXXX plant. The Company is presently rebuilding
the plant and replacing equipment destroyed or damaged during the fire.
We
have advised our client that the new more productive equipment is exempt from
tax for the following reasons:
-
After completion, the production area will be a new facility.
-
The Company has been in an expanding production mode for many years.
-
The new equipment is not normal operating replacements.
Since
the statute of limitations is running on the 1987 conveyor and packaging
equipment, it is important to obtain a timely answer to this request.
If
we can provide additional information or if you wish to visit the XXXXX or the
XXXXX plants, please let me know.
Very
truly yours,
XXXXX,
Special Consultant