July
18, 1991 Response from Tax
Commission
June
11, 1991 Letter from XXXXX of
the XXXXX
XXXXX
Re:
SIC Code for Dental Lab
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether a dental laboratory can qualify for the manufacturers exemption from
sales and use tax as provided for by Utah Code Ann. Section 59-12-104(16). You
provided certain manufacturing SIC codes which you felt performed similar
functions.
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 recommendation. The division's recommendation is as follows:
In
comparing the activities covered by SIC Code 3843, Dental Equipment and
Supplies, to a dental laboratory, businesses covered by SIC Code 3843
manufacture equipment, tools and supplies used by dentist and dental labs. The
SIC code manual for 3843 indicated that if artificial teeth are manufactured as
well as other dental equipment, tools and supplies, that they are those which
are not made in dental laboratories. These SIC codes, very clearly, are not
assigned to dental laboratories.
2.
The manual classifies dental labs who's primary activity is making dentures,
artificial teeth, and orthodontic appliances to order for the dental profession
in SIC code 8072, which is not a manufacturing SIC code.
The
Supreme Court of Utah and also courts from many other states have ruled that
exemptions from taxation must be construed narrowly. It is very clear that a
dental lab is not eligible for exemption under § 59-12-104(16).
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
Commissioner
Joe Pacheco
State
Tax Commission
Heber
J. Wells Building
160
East 300 South
Salt
Lake City, UT 84111
Dear
Commissioner Pacheco:
About
a month ago I spoke with you regarding the appeals process for a business that
feels they qualify for the manufacturing machinery and equipment exemption for
sales tax. I advised the firm of the process, however, they were under
construction and didn't believe they could complete the process to meet their
move schedule.
As
I have reflected on this request which would have been submitted by a dental
laboratory, I am concerned that there are instances where both dental and
medical laboratories are engaged in the true manufacturing of equipment or
products, yet because they are assigned to the Health Services classification
they carry an SIC code of 8071 and 8072. Thus, they are outside the SIC codes
classifications of 2000 to 3999 which do qualify.
Yet,
when I reviewed a list of businesses that would qualify, I found several that
appear similar to the dental laboratory:
3841
Surgical and Medical Instruments
3842
Surgical Appliances and Supplies
3843
Dental Equipment and Supplies
3851
Ophthalmic Goods
3999
Manufacturing Industries (not elsewhere classified)
It
would appear there could be a misunderstanding regarding the definition a
dental laboratory and perhaps a review of such facilities would be appropriate.
Would
you please give this issue some thought, and if in fact you believe there is
merit in the request, perhaps the issue could be reviewed by the Tax
Commission.
I
appreciate your openness and appreciated the information you shared with our
office. If our office can be of service to you, please let me know.
Sincerely,
XXXXX
Vice
President
XXXXX