October
16, 1991 Response from Tax
Commission
September
30, 1991 Letter from XXXXX of XXXXX
XXXXX
Controller
Re:
Manufacturers Sales Tax Exemption
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether manufacturing machinery and equipment purchased to replace equipment
destroyed in a fire qualifies for sales tax exemption 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 recommendations are as follows:
1.
It makes no difference whether machinery and equipment is destroyed by fire,
flood, vandalism, or wear. The purchase of new machinery and equipment to
replace the destroyed equipment is still replacement equipment. The exemption
for new or expanding manufacturing facilities does not apply.
2.
The Legislative intent for this exemption was to encourage new manufacturing
businesses to start in Utah and to encourage existing business to expand
operations in order to provide more jobs and expand the economy of Utah. The
purchases of machinery to replace machinery destroyed in a fire will not
accomplish the Legislative intent.
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 and a copy of the Utah Taxpayer's Bill of Rights are attached.
For
the Commission,
Joe
B. Pacheco
Commissioner
Mr.
Joe Pacheco
Utah
State Tax Commission
160
East 3rd South
Salt
Lake City, UT 84134
Dear
Mr. Pacheco,
On
August 25, 1991 our manufacturing facility ln Salt Lake City was destroyed by
fire. It Is our plan to begin production again at a temporary facility while we
rebuild at the original site.
During
the next few months we will be purchasing a significant amount of production
equipment. We feel that the purchase of this production equipment should not be
viewed as replacement, but should be exempt from sales tax based on the
"Expanding Operations" provision of the Utah sales tax code. The
equipment is the type that falls within the guidelines of manufacturing
equipment that would be exempt from sales tax.
We
respectfully request a ruling on the sales tax exemption status of our new
equipment purchases. We feel that our business should be viewed the same as one
that is just starting up - for we are starting with nothing and will be
expanding our business.
Thank
you for your consideration to our unique problem. Please call me if I may
provide you with any additional information.
Sincerely,
XXXXX
Controller