Response May 13, 1994 and
June 6, 1994
Request
March 9, 1994
XXXXX
Utah State Tax
Commission
RE: Definition of “de
minimis” within R865-19-85S.
Dear XXXXX
In order to serve our clients
better and have a clear understanding of the law XXXXX asks for a definition of
“de minimis” its used in R865-19-85S. The 1991 version of Regulation
865-19-85S(B)(4) replaced "predominate use," of the 1990 version,
with “de minimis.” Under the 1990
version it was our understanding that manufacturers could only use their
machinery for non-qualifying use, less than 49% of the time. However, we are
unaware of any determination to define “de minimis.”
Regulation 865-19-5S,
which covers the new and expanding exemptions states: “Machinery or equipment
purchased or leased for use in activities which may qualify it for exemption,
as well as in other activities, will not lose the exemption if the use in
non-qualifying activities is determined to be de minimis.” In other words, new and expanding
machinery may only be used to a certain degree for non-qualifying purposes.
However, what did the
creators of this law intend when using the word “minimis?” For example, XXXXX has purchased a fork lift
to be used in transporting raw material and finished product, this qualifies
for the new and expanding exemption in all other respects. With the
understanding that when the fork lift is used to transport raw material it may
be considered as part of the manufacturing process, and when it is used to move
finished product, it is not. With the term “de minimis” in mind, how much can
the XXXXX company use the new fork lift to transport the finished product? 50%,
0% or 10% of the time. In other words,
what is the definition of de minimis in respect to the time used in
non-qualifying activities?
I realize this
percentage may differ with various types of machinery. For example, the de minimis percentage in
respect to a fork lift may differ than a punch press or another type of
machinery. If this is the case, could
you please give us the proper guidelines to interpret the definition of “de
minimis” concerning different types of machinery along with the definition of
“de minimis.”
If you have any
questions or concerns please call me at XXXXX.
Thank you for your time.
Sincerely,
XXXXX
Re: Advisory Opinion -
Definition of “De Minimis”
Dear XXXXX:
Your request (copy
attached) for an advisory opinion as to definition of the term “de minimis” as used
in Tax Commission Administrative Rule R865-19-85S (copy attached) was referred
to the Auditing Division for their analysis.
The division's staff
recommendations are as follows:
1.
The opinion request is framed with reference to the amount of time the
equipment is used.
2.
Depending on the type and function of machinery or equipment involved,
measurement of use based solely upon a time factor may not be determinative.
Other measurements may be more appropriate under various situational facts.
3.
Regardless of the measurement factor deemed most appropriate (whether it
be time, units of production, etc.), a use factor in excess of 5 percent will
be considered more than de minimis.
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
Re: Advisory Opinion -
Definition of "De Minimis"
Dear XXXXX
In XXXXX you sent a
letter asking for specific guidelines and a definition of “de minimis” as used in the Tax Commission
rule R865-19S-85. In the normal course of
business the question was referred to the Auditing Division. They found no
previous opinion letters defining “de minimis.”
In a cursory search of
tax references, the IRS Code and the Utah Code there are several percentages
and dollar amounts mentioned. Each relates to a specific instance or law, but
there is no generally accepted formula for “de minimis.”
In summary, it appears
that the definition in Black's Law Dictionary is as clear as we could
find. It says de minimis things are “very small or trifling matters.” While I
am sure you would prefer the certainty of a percentage, this term is not
susceptible of easy, universal definition, therefore, the Commission has used
it sparingly and cannot elaborate further.
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