97-046
Response August 6, 1997
We are asking for an advisory opinion to clarify the
definition of a recycler.
Businesses calling themselves recyclers in the state
of Utah are currently bringing scrap paper into their facilities, sorting it by
grade, baling the different grades and shipping it out of state to end use
mills. The mills then pulp tile material in place of wood chips and use the
pulp to create a new product. There are no “end use" mills in the state of
Utah and we do not believe there ever will be due to the large amount of water
required to sustain the processes of a paper mill. The smallest facility our
customers ship to consumes 3 million gallons of water per day.
We are a brokerage company that handles
transportation and delivery arrangements of scrap paper to end use mills. We
have set many companies up on recycling programs which are unique to this
market. The companies we work with handle the sorting and baling of their
material for direct shipment to an end use paper mill. Since these customers
are handling the preparation of their scrap paper in the same way that a
recycling center does, we feel tile equipment they are using should fall under
the recycling exemption whether they are a grocery store, warehouse,
manufacturer, etc.
In the past year our customers have shipped for the
purpose of recycling over 5O,OOO,OOO lbs. of scrap paper that otherwise would
have gone into Utah landfills. As per your definition in the tax bulletin these
businesses are at a fixed location, utilizing machinery or equipment to process
paper into prepared grades of processed materials for use in new products that
would otherwise be made with nonrecycled materials. In consideration of these
facts, we feel anyone who purchases a piece of equipment for tile sole purpose
of recycling deserves to fall under the definition of a scrap recycler.
August
6, 1997
NAME
ADDRESS
CITY STATE ZIP
Advisory Opinion - Application of manufacturing sales
tax exemption to businesses that purchase equipment to bale paper products for
shipping to a recycler.
Dear NAME,
We
have received your request for sales tax guidance pertaining to the
manufacturing exemption. From your
letter and telephone conversations with our staff, you have indicated that your
client sells baling equipment to businesses (such as grocery and other retail
stores) for their use in sorting and bundling cardboard and paper products for
shipment to a recycler. As to sales by
your client of this type of equipment to retailers, we find as follows:
Senate
Bill 29 sets out the definition of recycler as one who, from a fixed location,
utilizes machinery or equipment to process qualifying items into prepared
grades of processed materials for use in new products. We interpret that language to mean that a
recycler is one who uses some process or treatment and actually
changes the character or nature of the item into a form that can be used as a
raw material in a new product. A
retailer or other business operator who merely sorts and bundles cardboard or
other paper products for shipment to a recycler is not a recycler within the
meaning of this exemption.
You
have indicated that no paper recyclers operate in Utah. Therefore, if the statute is read narrowly,
the exemption has no application to paper recyclers. Tax exemptions are sometimes intentionally written broadly to encompass
all activities of a similar nature.
Even if there are no paper recyclers in Utah today, the exemption is
broad enough to apply to any paper recycler who locates in Utah in the
future. If the wording of the statute
continues to cause you concern, we urge you to address your issue to the state
legislature. At this point we are bound
by the plain wording of the statute.
Thank
you for bringing this matter to our attention.
If you have other questions, please contact us again.
For
the Commission,
Joe
B. Pacheco,
Commissioner