Response November 30,
1993
Request
September 8, 1993
Utah State Tax
Commission
ATTN. Commissioners Office
160 East Third South
Salt Lake City, Utah
84134
RE: REQUEST FOR AN
ADVISORY OPINION
Dear Madam or Sir:
Your opinion is respectfully
requested concerning an interpretation and application of a sales tax exemption
in a particular situation. Specifically, Utah Code 59-12104(15), which is
sometimes referred to as the manufacturers exemption for new and expanding
equipment.
A manufacturer I am
familiar with recently expanded their operations by adding a new product line.
The new line allowed the company to expand into other markets.
In an effort to
minimize costs by avoiding duplication, certain processes on the new line were combined
with those on the old line. For instance; the first operation for both the new
line and the old line each occurs at station 1. As the products continue
through the manufacturing process, the single line separates into two where the
'unique' processes begin, and remain separated until the final products are
completed.
In order to bring this
new product line in service, several new pieces of equipment were purchased.
Some of the equipment is used exclusively for the new line, and other equipment
is shared by both the old and the new line.
When inquiring about
the sales tax impact, the company received direction that the equipment
supporting the new line were exempt, having met all the criteria listed in the
Utah Code. And the equipment pertaining to the old line was taxable. So
accordingly, the project in its entirety was
existed.
In my opinion, and
from discussions I have had with others from the Tax Commission, the company
acted within the guidelines of the rule. However, your concurrence to the action
taken in this situation, or one similar, is desired to further solidify this
opinion.
Thank you for your
attention to this request. If needed, I can he contacted at XXXXX.
Sincerely,
XXXXX
November 30, 1993
XXXXX
Re: Advisory Opinion -
Applicability of Manufacturing Exemption to Certain Equipment Acquisitions
Dear XXXXX:
Your request (copy
attached) for an advisory opinion as to whether certain equipment qualifies for
the manufacturing exemption under Utah Code Annotated Section 59-12-104(15) was
referred to the Auditing Division for their analysis and recommendation.
The division's staff
recommendations are as follows:
1. The equipment which is used exclusively
for the new line qualifies for the exemption, assuming that it meets the other
criteria for exemption as outlined in Administrative Rule R865-19-85S with
regard to the equipment's actual function, useful life, etc.
2. The equipment which is shared by both
the old line and the new line would not be considered as being for “new or
expanding” operations, but rather as replacement equipment not qualifying for
exemption.
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,
Alice Shearer
Commissioner