96-066
Response
April 30, 1996
Request
Commissioners
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, Utah 84134
Dear
Commissioners:
Regarding: Noncommercial consumption of gas,
electricity, heat, coal, fuel oil, or other fuels.
XXXXX,
one of our recent clients, is a manufacturer who primarily produces magnesium
ingots which are supplied as raw materials to other manufacturers. This company
uses large quantities of XXXXX and XXXXX as carrying agents for another organic
chemical in removing boron from the XXXXX that is pumped from the XXXXX.
Although
in this instance these substances are not consumed as fuels, they are commonly
used as fuels and referred to as fuels.
According to Utah Code Annotated 59-12-103 and Rule R865-19S-35, fuels
and oxygen which have a predominant use in noncommercial activities are
excluded from sales or use taxation.
And with the recent passage of House Bill 203, there will soon be an
exemption for fuels and oxygen for industrial use.
Although
your auditing division has indicated that qualifying substances (other than
oxygen) must be used as fuels in order to be nontaxable, neither the law nor
the rule makes that stipulation. We
would appreciate receiving an advisory opinion as to whether or not purchases
of these fuels would qualify for a nontaxable status.
Thank
you for taking the time to respond to this request.
Sincerely,
XXXXX
XXXXX
RE: Advisory opinion - Uses of fuel that qualify
for sales tax exemption.
Dear
XXXXX,
We have received your request for an
opinion as to whether XXXXX may be purchased tax free for use as a carrying
agent in a manufacturing process. The
Auditing Division has historically advised taxpayers that the fuel exemption
applies to qualified substances when they are used as fuels in industrial
processes. Although the Auditing
Division’s interpretation is a reasonable one, you have raised a legitimate
issue as to interpretation of the exemption.
We can only respond to your question by issuing a formal interpretation
of the exemption. Since that
interpretation will have broad implications beyond your client’s particular
situation, we feel that we must use the rulemaking process to announce our
position.
We will begin that process right
away. Once a rule has been drafted and
adopted by the Commission, it will be open to public comment for a period of
thirty days. Thereafter, the Commission
will vote on the rule, and, if adopted, the rule will then take effect. If
XXXXX is up against the statute of limitations for claiming a refund, we
suggest that the claim be submitted to preserve XXXXX’s appeal rights. Otherwise, please advise your client that we will respond with an
advisory opinion when the rule is formally adopted.
Thank you for your patience. As always, we appreciate your bringing
matters like this to our attention.
For the Commission,
Alice Shearer,
Commissioner