November
8, 1991 Response from Tax Commission
October
15, 1991 Letter from XXXXX
XXXXX
Re:
Manufacturer's Exemption - Trash Compactor
Dear
XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether a trash compactor qualifies for exemption under Utah Code Section
59-12-104(16).
Although
your inquiry was framed as a request for a declaratory judgment, Tax Commission
policy is to initially treat all such inquires as requests for advisory
opinions. 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:
Sales
Tax Rule R865-19-85S(A)(1) says, "'Machinery' means electronic or
mechanical machines to be incorporated into a manufacturing or assembling
process from the initial stage where actual processing begins through the
completion of the finished end product, including final processing, finishing
or packaging of articles which are for sale in commerce."
Subparagraph
2 states, "'Equipment' means any independent devise separate from any
machinery but essential to an integrated or continuous manufacturing or
assembly process or any sub unit comprising a component of any machinery or
auxiliary thereof, including such items as dies, jigs, patterns, molds, and
similar items used in manufacturing, processing, or assembling."
A
trash compactor is not used in any phase of the manufacturing process. It has
nothing to do with finishing a product or packaging an article. The purchase of
a trash compactor does not qualify for the manufacturer's exemption.
A
trash compactor is unlike the pneumatic blower and chip bin which were the
subject in the Idaho Supreme Court case, Richardson v. State Tax Commission.
That equipment was used to further process and package wood chips which were
sold as a by product of the lumber mill operation to a paper manufacturer.
Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division's recommendation. 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
Utah
State Tax Commission
160
East 300 South
Salt
Lake City, Utah 84134
Dear
Sir/Madam:
Please
issue a declaratory judgement regarding the following sales tax issue as it
pertains to the exemption provision dealing with new or expanding manufacturing
facilities.
The
company is involved with a major expansion of its manufacturing facility and
one of the pieces of equipment purchased is a compactor . The compactor has a
useful life of more than three years and did not replace a compactor. The
purchase of the compactor was required because of the increase in materials
requiring disposal that resulted from the expansion of the manufacturing facility.
The compactor is a necessary part of the expanded manufacturing process and
permits the facility to operate as efficiently as possible by compacting by-
products, materials and other elements of the manufacturing process that are no
longer useful to the company in its production of finished goods for resale.
Please
advise if the purchase of this compactor qualifies for the sales tax exemption
that was adopted to encourage plant expansion in the state of Utah. Thank you
very much for your consideration of this request.
Sincerely
yours
XXXXX