Response March 13, 1995
Request
December 21, 1994
Mr. W. Val Oveson
Utah State Tax Commission
Office Of The Commission
210 North 1950 West
Salt Lake
City, UT 84134
Dear Mr. Oveson,
RE: Advisory Opinion For Sales Tax Manufacturing
Exemption
XXXXX intends to construct a new XXXXX Plant in Salt
Lake City. The proposed site is on a
13.25 acre tract in the XXXXX business park.
The new facility will produce boxes and sheet goods for further conversion
at other facilities.
We presently operate a small XXXXX plant in XXXXX that
produces about 80 million square feet of XXXXX per year from sheet stock
supplied from our XXXXX, Idaho plant.
The present plant employs a total of 42 people. The new facility will produce in excess of
one billion square feet of XXXXX and sheet stock from linerboard and
corrugating medium (roll paper.) Total
plant employment will increase to 130, with potential employment growth in the
future.
Estimated cost for machinery and equipment for the
new plant is approximately $$$$$ million.
This excludes the value of major equipment, which be will relocated from
North Salt Lake to the new location.
The plant meets all definitions of a "new or
expanding operations" and does not involve "normal operating
replacements". We request that an advisory opinion on the question of
qualification for the Utah sales tax manufacturing exemption be issued.
A brief Description of Facilities and the process
equipment is attached.
If you have any questions or need additional
information, please contact me.
Thank you for your prompt attention to this matter.
Sincerely,
XXXXX
TO: XXXXX, Director
FROM: XXXXX, Secretary
DATE: January 5, 1995
SUBJECT:Request for Advisory Opinion - No. 95-002DJ
Attached is a request for an advisory opinion from XXXXX of XXXXX. Will you please review the request of XXXXX
for an advisory opinion regarding sales tax manufacturing exemption.
Please prepare the response for signature by the Commission as per the
guidelines established by them.
Thank you.
XXXXX
Re: Advisory Opinion -
- Applicability of Sales Tax Exemption for New or Expanding Manufacturing
Facilities
Dear XXXXX:
You requested an advisory opinion as to whether your intended new corrugated
container plant to be located in Salt Lake City will qualify for the Utah sales
tax manufacturing exemption.
Our research indicates as follows:
1. Certain purchases or leases
do not qualify for the exemption. This
opinion is not intended to give approval to any items which meet any of the
disqualifying indicia. Examples of
items disqualified are as follows:
a. Any item which becomes a part of the real
property,
b. Any item with less than a three-year useful
or accounting life,
c. Any item used substantially for research and
development,
d. Any item used substantially for receiving,
warehousing or shipping, except for automated material handling and storage
machinery which is part of the integrated continuous production cycle, or
e. Equipment for maintenance.
2. Consequently, based solely
on the somewhat limited descriptions included in your opinion request, the
items of equipment listed as "PROCESS EQUIPMENT" appear to qualify
for exemption from sales and use tax with the following exceptions:
a. The $$$$$ allowance for rebuild of the XXXXX
will qualify only if determined to be the equivalent of the purchase of a near
XXXXX as opposed to a repair.
b. Mobile equipment will be disqualified if
used substantially in warehousing or shipping operations as opposed to use
during the manufacturing processes.
c. Any other equipment or machinery which is
disqualified from the exemption under the criteria listed above but, because of
inadequate description or misunderstanding, has not been recognized as such in
this opinion .
3. With regard to items
categorized as "AUXILIARY SYSTEMS", we would expect that some
portions of described systems would involve real property and that those
portions would consequently, be disqualified from the exemption. If the boiler functions for heating of the
building as well as to provide steam for equipment and machinery
functions, it will be disqualified. If the propane storage tank will be used
substantially for building heat or to fuel mobile equipment not qualifying for
the exemption, the tank itself will not qualify for the exemption.
4. Items described under the
heading of "UTILITIES" will generally not qualify for exemption
because of the real property disqualification.
This opinion is based upon the facts presented in your letter. 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 judgement 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
TO: ALICE SHEARER,
Commissioner
FROM: XXXXX, Executive
Director
DATE: March 10, 1995
RE: Advisory Opinion
for XXXXX -- XXXXX -- Paper Engineering -- Applicability of Sales Tax Exemption
for new or Expanding Manufacturing Facilities
Auditing Division has prepared an advisory opinion for XXXXX of
XXXXX. I have reviewed this opinion and am forwarding it to you for your
review and signature.
Thank you!
GENERAL
A new full line corrugated container facility is to be constructed
at the XXXXX, Salt Lake City, Utah. A
13 acre site was purchased in XXXXX, cleared and prepared for construction.
The proposed facility would consist of a 202,000 SQ FT
manufacturing facility and an attached 10,000 SQ FT office facility. Construction of the manufacturing plant will
be steel frame with metal insulated panel.
The roof will be insulated built up construction over metal deck. Interior walls will be either masonry or
gypsum wall as required. Construction will be single story with the exception
of a portion of the interior "Core Area" which is required for
storage and electrical equipment.
Sprinkler protection will be provided for the entire facility.
The manufacturing area will include a roll stock storage area of
approximately 67,000 square feet. In
addition to roll storage, this area will be utilized for sheet stock finishing
and shipping and for the loading area for the corrugator rollstands. Due to code restrictions the roll storage
area will be separated from the remainder of the manufacturing area by a rated
fire wall with fire doors for all wall penetrations.
Five rail car load spots and two truck docks will be included in
the roll warehouse. In addition a ramp
entry will be included. A new rail spur
off the XXXXX will be installed.
The remainder of the manufacturing area will be divided between
the corrugator and sheet finishing operations.
These areas will be separated by the core building which houses the
shops, offices, stores, utilities, starch room, and corrugator control room.
Process equipment in these areas is described in detail
below. The finishing area will include
space for finished goods storage and shipping.
Eight truck docks are included with dock seals, doors and dockboards.
PROCESS EQUIPMENT
Corrugator
A new 98" corrugator is to be installed complete. The machine will initially be rated (when
running 200 # Test Liner) at a maximum speed of 850 FPM, and at a future speed
of 1000 FPM with the addition of double pre-heaters on the single facers. Maximum sheet length will be 220". Automatic controls will allow rapid grade
changes with minimum lost production and paper stock.
The corrugator will consist of:
B-Flute Fingerless Single Facer
C-Flute Fingerless Single Facer
E-Flute Cartridge For Above
Five (5) Double position Shaftless Mill Roll Stands
Five (5) Splicers
Overhead Conveyor System
Two (2) Single 42" Preheater
One (1) Triple 42" Preheater
Double Glue Machine
Double Facer w/48' Heating and 30' Traction Sections
Steam Circulation and Drainage System
Rotary Shear and Diverter Assembly
Fixed Web Table
Automatic Slitter-Scorer
Web Director Table
Double Direct Drive Cut-Off
Automatic Order Change Control System
Double Downstacker
The corrugator will include a DC electric drive. Main machine controls will be housed in a
climate controlled control room of approximately 430 square foot in size. Noise enclosures for the single facers are
not included as part of the project.
Corrugator Conveyor System
Discharge conveyors from the corrugator will consist of double
72" Wide and 84" Wide live roll conveyors approximately 58'
long. These conveyors will transport
sheet stacks from the downstacker to an automated transfer cart. The transfer cart will convey stacks to the
appropriate staging conveyor for the carton plant or to the sheet line
strapping/shipping system. The
strapping/shipping system consists of a double 84" X 85' transfer
conveyor, a 84" X 94' finishing conveyor, a stack centering device, a two
head unitizer (Strapper) and a double 84" X 29' shipping conveyor with a
gravity decline section. No automatic
provision for insertion of pallets is to be included. If required pallets will be inserted manually.
Main Line Infeed Conveyor System
The main line conveyor system begins at the discharge of the
Corrugator Conveyor Transfer Cart. The
cart will discharge to one of thirteen 60" X 68" Staging
Conveyors. Based on a 56" stack
height, the staging conveyors will have a rated storage capacity of
approximately 1.75 MMSF. Adequate space
will be reserved to add additional staging conveyors as production demands
increase. Transfer cart tracks and
controls will be included for this future requirement. The staging conveyors will discharge to a
second transfer car, the finishing department transfer car. This car will transfer each stack from the
staging conveyors to the infeed conveyor for the appropriate finishing line.
Finishing Lines
Initially space for eight in-line finishing lines will be
provided. These spaces will be
dedicated as follows:
38" Flexo/Folder/Gluer
The first line begins with a infeed conveyor which receives stacks
from the finishing room transfer car and transfers them to a new
prefeeder. The new prefeeder will feed
sheets in the required manner into the lead edge feeder of a new 38" X
97" (Approximate) Flexo/Folder/Gluer.
The 38" Flexo will include the feed section, three (3) print
sections with two-roll flexo ink systems, creaser-slotter section, in line
creaser/die cutter station, folder section with vacuum belt transfer, and counterejector
section. The Flexo unit will include
automatic controls to allow rapid set-ups, power wash automatic washup systems
for each print section, and provision for the future installation of a fourth
print section. The counter-ejector will
discharge to a dedicated overhead discharge conveyor ("36") which
will transport bundles to the Remote Carton Stacker after being bundled in a
combination bundle conditioner/tyer.
50" Flexo/Folder/Gluer
The second line begins with a infeed conveyor which receives
stacks from the finishing room transfer car and transfers them to a new
prefeeder. The new prefeeder will feed
sheets in the required manner into the lead edge feeder of a new 50" X
97" (Approximate) Flexo/Folder/Gluer.
The 50" Flexo will include the feed section, four (4) print
sections with two-roll flexo ink systems, creaser-slotter section, in line
creaser/die cutter station, folder section with vacuum belt transfer, and
counterejector section. The Flexo unit
will include automatic controls to allow rapid set-ups, power wash automatic
washup systems for each print section, and provision for the future
installation of a fourth print section.
The counter-ejector will discharge to a dedicated overhead discharge
conveyor ("36") which will transport bundles to the Remote Carton
Stacker after being bundled in a combination bundle conditioner/tyer.
50" Flexo/Folder/Gluer (Future)
The third line will be reserved for an additional 50" Flexo
to be installed when production requirements justify.
66" Rotary Die Cutter
The fourth line will consist of a new infeed conveyor (with
turntable) feeding an existing 66" X 113" Koppers rotary die cutter
which is to be relocated from the Burley plant. The existing manual feed system is to be maintained as well as
the existing Martin Stacker. The
stacker will feed onto a discharge conveyor which will convey stacks to the
finishing shipping conveyor line. An
allowance of $$$$$ is included to rebuild the die cutter to a "near
new" condition.
64" X 165" Universal Rotary Slotter
The fifth line will consist of new infeed and discharge conveyors
and the existing SLC 64" X 165" Universal rotary slotter together
with the existing infeed tilt table and Martin Stacker. Feeding and discharge will continue to be
manual. No major renovation of existing
equipment is anticipated.
50" X 103" 2-Color Press
The sixth line will consist of the existing SLC 50' X 103" 2
color press relocated to the new facility.
A new infeed conveyor from the finishing room transfer car and lift
table will be installed are to be installed.
Anew discharge conveyor will transfer stacks from the relocated stacker
to the main line finishing conveyor.
Feed and discharge to the press will continue to be manual.
34" Bobst Die Cutter
New infeed and discharge conveyors will be installed with the
existing relocated SLC 34" Bobst die cutter in the seventh position. Feed and discharge from the die cutter will
continue to be manual.
Straight Line Folder Gluer
The last position will be utilized by a used straight line folder
gluer. A unit approximately equivalent
to a Post Model MX-3080 is anticipated.
For purposes of the estimate, 2/3 of the estimated new equipment cost is
included. Separately, the cost for
required conveyors has been included.
It has been assumed that any stacking equipment would be included with
the used folder/gluer. A survey of used
equipment currently available indicates the above assumptions are reasonable.
Main Line Finishing/Shipping Conveyor System
The main line finishing/shipping conveyor system begins at the
discharge of the relocated Burley 66" die cutter. Major components include a nominal 72"
X 272' mainline/strapping conveyor, a nominal 72" X 117' return conveyor,
four nominal 60" X 40' shipping conveyors, and a nominal 60' X 40' stretch
film/shipping conveyor. The mainline
conveyor includes a stack centering device and one three-head unitizer
(strapper). The conveyor will be
designed with a removable section for installation of a second unitizer when
required by increased production rates.
The stretch wrap machine will be fully automatic. No provision for automatic insertion of
pallets is included. Insertion will be
manual utilizing lift trucks if required.
Remote Carton Stacking
The elevated conveyors from the 38" & 50" Flexos
will transfer bundled blanks to an automatic load former located remote from
the Flexos. Here a single operator will
perform all stacking operations for both machines. Stacks will be discharged on a new conveyor to the mainline
conveyor.
Miscellaneous Relocated Equipment
Provision for relocation of several pieces of "stand
alone" equipment has been provided.
It is anticipated the existing Stitcher, taper and curtain coater will
be relocated. Market demands at the
time of relocation may dictate that additional units also be relocated.
Trials to determine if the existing curtain coater emits excess
quantities of XXXXX's are in progress.
The unit will be relocated only if no extraordinary measures are
required for installation.
Waste Handling System
Pneumatic waste handling systems will be included wherever
significant waste is generated. Six
separate collection systems will be included so that individual fans can be
shutdown if not required. All systems
will discharge to a central cyclone which is sized for the ultimate future
plant capacity. Five systems will
service the finishing area, one the corrugator and one the shredder
system. The cyclone and associated equipment
will be located on the west side of the manufacturing area and between the
corrugator and finishing areas to minimize conveying distances.
Air discharge from the cyclone will be filtered in a cloth bag
type system and returned into the manufacturing area. Filter cleaning will be controlled by an automatic timer.
Waste from the cyclone will discharge into an automatic waste
baler. The waste baler system will
include scales and conveyors so minimal operator attention will be
required. The baler will produce
30" X 36" bales and be powered by a 25 HP hydraulic unit.
Miscellaneous scrap will be processed in a 92" wide shredder
powered by a 75 HP drive. Scrap will be
blown directly to the cyclone.
Starch System
A complete fully automatic starch cooking and supply system will
be installed. The system will be very
similar to systems recently installed at several of our other corrugator
plants. The system will prepare small
batches of starch and store them in a three compartment tank. Starch will be circulated in a closed loop
from the tank to the corrugator and back.
Rapid clean out and change of formulation will be possible with this
arrangement.
Starch will be received by rail and pneumatically unloaded into a
5500 cubic foot silo with a PD unloading system. A separate pneumatic system will convey starch to the starch
cooking system.
Caustic for the system will be received by truck and stored in a
contained nominal 2000 gallon fiber glass tank located in the starch room.
Die Equipment
An automatic rotary die washer for cleaning dies will be
provided. Also included is a
"OPTI-CHECK" unit for setting printing plates. Initial plant operation will include manual
handling of dies utilizing carts and fork lifts. Space will be left for the future installation of an automated
system including a die elevator to/from the mezzanine. Storage racks for storage of rotary dies and
flexo plates will be included with the building. Existing racks for storage of plate dies will be relocated from
the current plant.
Mobile Equipment
The AFE provides for the addition of one 5000# capacity lift truck
and two (2) 15,000# clamp trucks.
AUXILIARY SYSTEMS
Boiler
A single 10,000 PPH natural gas fired boiler is to be installed. Boiler design will be fire tube. The boiler will be supplied with low NOX
burners as required by the local agencies.
Auxiliary back-up fuel for the burner will be propane gas. An on site 6000 gallon storage propane tank
will provide approximately XXXXX hours back-up. The tank will also be utilized for mobile equipment fueling. The boiler room complex will be sized for
the future addition of a second boiler to provide backup and peaking
capability.
Boiler feedwater will be softened and treated by a semiautomatic
system. Steam condensate is to be
collected, and returned to the system through a combination deaeration-storage
tank system.
Hot Water System
Hot water will be generated using a small steam to water tube and
shell heat exchanger and stored in an accumulation tank. Hot water will be circulated continuously by
a small pump throughout the process area on a closed lop system.
Compressed Air System
Two oil-less 750 SCFM screw compressors, equipped with air intake
silencers and refrigerated air dryers will be installed within a masonry room
within the complex. Compressed air
discharge from the dryers will be piped to a 660 gallon receiver and then to
all process area using a looped pipe system.
Normal operation will be with one compressor operating and automatic
start-up of the second compressor when needed.
UTILITIES
Water
Water is available from the local utility. It will be supplied based upon a metered
usage.
Sewerage
Effluent from the process areas (corrugator & finishing) will be
maintained separately to a point outside the building perimeter then combined
before discharging into the local utilities trunk. This will allow for future installation of waste pretreatment if
it becomes economical or is required by regulations. Effluent fees will be based on water usage with surcharges for
TSS and COD discharges above specified levels.
Anticipated levels will not now justify pretreatment.
Sanitary wastes will discharge separately to the utilities trunk.
Electricity
Primary power is available from the utilities underground service
presently installed in the industrial park.
Under floor concrete encased conduits will deliver cables to a new
transformer room located in the core building.
Two silicone filled transformers will be installed to supply all power
for the facility.
Natural --Gas
Natural gas is currently available at the site's property line.