Response
October 30, 1992
October
30, 1992
XXXXX
Re:
Tax on Electricity and Fuel
Dear
XXXXX:
Your
request for an advisory opinion that fuel and electricity used by a pizza
retailer selling only to carry-out and home delivery customers and used by a
retail/wholesale bakery that prepares food for consumption elsewhere quality
for exemption from sales tax has been referred to the Auditing Division for
their analysis.
It
is the division staff recommendation that:
1.
Although it is true that the definition of noncommercial use of fuels and
electricity is not dependent upon the user operating in an activity covered by
SIC codes 2000 to 3999, there is certainly a direct correlation between those
SIC activities and the requirement that the exemption for fuels and electricity
is available only for use in agriculture, mining and manufacturing. All
activities not specifically defined as noncommercial or residential consumption
are considered as commercial consumption. Section 59-12-102 in defining
commercial consumption says that a "retail establishment" is a commercial
user. Therefore, the pizza processor and the bakery are considered retail
establishments which are commercial users of fuel and electricity.
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.
To
arrange for Americans with Disabilities Act accommodations, please contact the Tax
Commission at (801) 530-6920, (801) 530-6077 or TDD (801) 530-6269 allowing
three working days notice.
For
the Commission,
Joe
B. Pacheco
Commissioner
XXXXX
August
6, 1992
Mr.
Joe Pacheco, Commissioner
Utah
State Tax Commission
Heber
J. Wells Building
160
East 300 South
Salt
Lake City, Utah 84134
RE:
Advisory Opinion Request - Taxability of Certain Gas and Electricity Purchases
Dear
Commissioner Pacheco:
A
question has come up recently regarding the taxability of gas and electricity used
at certain retail establishments for preparation of food items. Specifically,
we request an advisory opinion on the taxability of fuel and electricity under
the following scenarios:
A
retail establishment prepares food items for consumption elsewhere. This type
of retailer would include businesses that sell pizza where the pizza processor
or "manufacturer" would only sell for carry-out or home delivery.
A
retail/wholesale establishment such as a bakery that prepares food items for
consumption elsewhere and usually at a later time.
In
both cases the retailer does not provide the typical facilities or services
associated with a restaurant. (Restaurants are considered
"commercial" under the definition section of the Sales and Use Tax
Act.) There are no tables or chairs, waitresses, microwave ovens for
self-heating product, etc. These businesses are using gas and electricity for
"producing or compounding" of a product which will be resold (see
Rule R865-19-35S).
We
feel there is an often misunderstood concept among the public (and even with
some employees within the Tax Commission) that in order to qualify for an
"exemption" of sales tax on fuel or electricity, the vendor must have
an SIC code between 2,000 and 3,999. Rule R865-19-35S states that fuels and
electricity used for commercial consumption are subject to sales tax, and
conversely, fuels and electricity used for noncommercial purposes are not
subject to sales tax. The "exemption" for fuel, gases and electricity
is not dependent on SIC codes as is the case for the manufacturing exemption.
The
law and rule define non-taxable,
non-commercial consumption of gas, fuel and electricity as being for use
in mining or extraction of minerals off highway agriculture, including
commercial greenhouses, irrigation, pumps, farm machinery, and other farming
activities to production the agricultural product up to the time of harvest or
placing production into storage facilities and use in manufacturing tangible
personal property or use in producing or compounding of a product which will be
resold.
REQUEST
FOR ADVISORY OPINION
Based
on the foregoing information, it is respectfully requested that your advisory
opinion will find that retail or wholesale establishments as described are
"considered" non-commercial, the same as any other producer,
manufacturer or compounder of products which will be resold.
If
you or your staff need additional information or would like to discuss the
issue before issuing your opinion, please advise; otherwise we hope we can
expect an early reply.
Thank
you.
Respectfully,
XXXXX