Response
July 10, 1992
July
10, 1992
XXXXX
Re:
Manufacturer's Sales Tax Exemption
Dear
XXXXX:
This
letter is in response to your recent request for the Tax Commission to issue a
declaratory judgment that your purchases of machinery and equipment used in the
manufacture of iron on transfers and blank video cassettes qualify for sales
tax exemption under Code Section 59-12-104(15).
Although
your inquiry was framed as a request for a 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 recommendations. The Division's recommendations are as
follows:
1.
The manufacture of iron on transfers and blank video cassette tapes does qualify
as manufacturing activities eligible for sales or use tax exemption under Code
Section 59-12-104(15). Qualifying machinery includes only machinery used in the
actual production process. Shipping is not part of the production process;
therefore, the purchase of the XXXXXX mailing system does not qualify. The MAC
computer system used to develop and design iron on transfers does not qualify
for exemption. It is not used directly in the production process. The other
equipment purchases do quality for exemption.
2.
If tax has been paid directly to the Tax Commission, XXXXX may take a credit on
their next sales tax return. If tax was paid to a vendor or lessor, an
exemption certificate should be issued to the vendor along with a request that
the vendor refund any tax collected. A copy of an exemption certificate is
attached.
3.
Refunds can be made only for the past three years. A refund of tax paid on the
leases started on XXXXXX will pass beyond the statute of limitations on XXXXX.
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 Bill of Rights are
attached.
For
the Commission,
Joe
B. Pacheco
Commissioner
Utah
State Tax Commission
160
East Third South
Salt
Lake City Utah 84134-0400
RE: Declaratory judgment according to Tax
Commission Rule R861-1-5A
Dear
Madam or Sir:
XXXXX
operates a Manufacturing Plant at XXXXX, Utah. In 1989 this Plant began
manufacture iron on Transfers. These
transfers are designed in XXXXX, Utah and, manufactured in the XXXXX
Facility.
In
1991 this Manufacturing plant began loading Video Cassette Cartridges with
Video Film of various lengths.
Both
the Transfers and the Video Cassettes are then sold to companies through out
the United States for resale.
We
are requesting a declaratory judgement to determine whether the purchases and
leases of Machinery and Equipment on the attached lists are exempt from Utah
State Sales Tax.
Information
regarding this request is as follows:
l. Items on the attached lists are mechanical
or electronic machines used in the
manufacturing or Packaging or the Products described above.
2.
Items are Tangible Personal Property.
3. Manufacturing of these products is new to
this Corporation. The manufacturing of Transfers began in 1989 and the loading
of Video Cassettes began in 1991.
4. The Products are substantially different in
nature after our manufacturing process.
5. The manufacturing is done in a Plant located
in the state of Utah.
6. Products are new after manufacturing.
7. The manufactured Products are sold as
tangible Personal Property.
8. The Establishment where this manufacturing
takes place is a single Physical location in XXXXX, Utah.
9. This equipment and machinery is not
replacement equipment or machinery.
10. These items of equipment and machinery have
a useful life of 5 years or more.
11. Substantially all sales are at arms length
and at wholesale.
12. Records are available at XXXXX, Utah
supporting the claim that the machinery and equipment qualify for this
exemption.
13. All of this equipment was Purchased or
leased after July 1, 1985.
This
equipment is available for inspection at the manufacturing Plant in XXXXX,
Utah. The records concerning the purchases and leases are available at our
Corporation offices in XXXXX, Utah.
If
you need more information or would like to inspect these items. Please contact me at XXXXX.
Thank
you.
XXXXX
Company
Controller