96-095
Response
Request
Chairman
From: XXXXX
Subject:
Requesting Declaratory Judgement/Tax Commission Rule R865-1A-5
Date:
Dear
Mr. Oveson,
In the past my company has been coded
as a 7699. I’ve spoke with XXXXX, and he directed me to section H, in letter
form.
I am now manufacturing and doing
some sharpening and repair, but more so manufacturing. The requirement to do
more manufacturing has called for the purchase of new machinery and some
upgrades of the old.
Therefore does my company qualify
for sales tax exemption on the purchase of these machines?
Please feel free to call at any
time. Your earliest reply will be awaited.
Respectfully,
XXXXX
XXXXX
Advisory opinion - exemption on manufacturing
equipment.
Dear
XXXXX
We have received your request for
information pertaining to the sales tax exemption on purchases for
manufacturing equipment. As we
understand your situation, your operation has been classified in SIC 7699. You have recently shifted your primary
business activity from the repair service category to manufacturing parts,
tools or bits for use in mining industries.
You are in the process of purchasing new machinery or equipment for use
in this new operation. We offer the
following guidance concerning the sales tax exemption on manufacturing
equipment:
Sales or leases of machinery and
equipment by a manufacturer for use in a new or expanding operations related to
the manufacturing process in a Utah manufacturing facility are exempt from
sales tax. A manufacturing facility is
defined as an establishment described SIC codes 2000 - 3999 of the 1987
Standard Industrial Classification Manual.
At the outset,
your operation must fit within a manufacturing SIC
code. We understand that you are unsure
of your proper SIC classification. From
your description, your operation may fall within SIC 3532 (manufacturing of
mining machinery and equipment), 3545 (manufacturing machine tool accessories),
or some closely related manufacturing code.
Assuming that your operation fits within a qualifying manufacturing
code, you may purchase manufacturing equipment and machinery tax free under the
following conditions:
1. The exemption applies only to tangible
personal property, not real property or tangible property that is purchased and
becomes an improvement to real property.
Generally manufacturing equipment remains personal property, but if it
is affixed to real property and you have a question about its status, contact
us for further information.
2. Machinery or equipment must have a
useful economic or accounting life of at least three years to be eligible for
the exemption.
3.
Machinery or equipment used for an
activity that is not part of the manufacturing process, such as equipment used
to transport or ship the final product, does not qualify for the
exemption. Machinery or equipment that
is shared for use in manufacturing and non-manufacturing activities does not
qualify for the exemption unless the use in a non-qualifying activity is de
minimis. If you are carrying on
non-manufacturing activities in addition to manufacturing activities, we
caution you about using the same equipment in both operations. Unless the use of the equipment in
non-qualifying activities is inconsequential, that use may be enough to
disqualify the purchase from the exemption.
If you believe that your equipment
purchases meet the conditions set out here, you may purchase the equipment tax
free. You must complete a sales tax
exemption certificate for the vendor’s records.
The vendor should have that form on hand.
If you have other questions, please
contact us.
For
the Commission,
Alice
Shearer,
Commissioner