Did an egg-processing company's new plant and production line qualify for Utah's manufacturing equipment exemption and a refund of tax already paid?

Plain-English summary

Utah Private Letter Ruling 90-010DJ addressed an egg-products company that moved to a new plant, installed a new production line, expanded capacity, and hired additional employees.

The company bought pasteurizing, freezing, packaging, pumping, boiler, egg-breaking, and shipping equipment.

The Commission treated the egg drying, freezing, and breaking activity as a separate manufacturing establishment under SIC 2017 and allowed the manufacturing exemption for qualifying production equipment.

It also allowed a refund of tax already paid on qualifying purchases.

Separate manufacturing establishment

The Commission said the company's primary SIC code should be 5144.

Rule R865-19-85S nevertheless allowed distinct economic activities at one physical location to be treated as separate establishments.

Egg drying, freezing, and breaking fell under SIC 2017, which the Commission identified as a qualifying manufacturing code.

New plant requirement

The rule's new-or-expanding-operation definition included activities begun at a new physical plant location in Utah.

The Commission understood the company to meet that requirement.

Its qualifying egg-processing activity was therefore entitled to the manufacturing exemption.

Qualifying equipment

The exemption covered machinery actually used in the production process.

The ruling identified the company's pasteurizer and related system, freezers, packaging machinery, pumping machinery, boilers, and egg-breaking equipment as the types of purchases under review, subject to their production use.

Excluded equipment and later purchases

Machinery used for storage or distribution did not qualify.

The Commission specifically placed shipping equipment outside the exemption.

It also said additional purchases and replacements made after the expansion was complete would not qualify under the cited rule.

Refund procedure

For vendor-collected tax, the company could issue a sales-tax exemption certificate to the vendor and request a refund.

If the company had paid sales or use tax directly to the Commission, it could apply to the Commission for a refund.

Holding

Under the stated expansion:

• Egg drying, freezing, and breaking qualified as SIC 2017 manufacturing.
• The activity could be treated as a separate establishment.
• The new plant satisfied the cited new-or-expanding-operation condition.
• Production machinery qualified for exemption.
• Tax already paid on qualifying equipment could be refunded.
• Storage, distribution, and shipping equipment did not qualify.
• Later additions and replacements after completion of the expansion did not qualify.

What this means for you

Food processors and manufacturers

A company's overall primary industry code did not prevent a distinct activity at the same site from qualifying as a separate manufacturing establishment under the historical rule.

Plant expansion and procurement teams

Document the new plant, production activity, equipment function, acquisition timing, and whether each item is used in production or distribution.

Accountants and tax professionals

Separate qualifying production equipment from shipping and storage assets, and verify current exemption and refund procedures.

Common questions

Q: Did the egg-processing activity qualify as manufacturing?

A: Yes, under SIC 2017.

Q: Did all equipment at the new plant qualify?

A: No. Storage, distribution, and shipping equipment did not.

Q: Could the company recover tax already paid?

A: Yes, for qualifying equipment, through the vendor or directly from the Commission depending on how the tax was paid.

Q: Did later replacements qualify?

A: The ruling said no once the expansion was complete.

Key source language

• Separate establishment: distinct and separate economic activities at one location could be “treated as a separate establishment.”
• Manufacturing code: “Egg drying, freezing and breaking does clearly fall under SIC code 2017.”
• Exemption: the company was “entitled to the manufacturers exemption and a refund of tax already paid on qualifying equipment.”
• Exclusion: “Machinery used for storage or distribution (shipping equipment) does not qualify for the exemption.”

Citations and references

• Utah Code Ann. § 59-12-104(16)
• Utah Sales Tax Rule R865-19-85S
• Standard Industrial Classification code 2017
• Standard Industrial Classification code 5144

Source

• Landing page: Utah Private Letter Rulings
• Official ruling source: Utah PLR 90-009 page containing the appended 90-010DJ text
• Source-location note (checked 2026-10-07): the official 90-009 HTML file contains a second ruling section headed 90-010DJ, dated January 7, 1991. The separate 90-010.htm URL returns HTTP 404. This page retains the exact shared official file URL and reproduces only the 90-010DJ section.
• Fetch note: the actual official source URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

90-010DJ

Response
January 7, 1991

January
7, 1991

XXXXX

XXXXX

Certified
Public Accountants

Re: Declaratory Judgment - XXXXX

Dear
XXXXX:

This
letter is in response to your recent request for a Tax Commission ruling on whether XXXXX qualifies for exemption on machinery and equipment purchases under the provisions of �59-12-104(16). You stated they moved to a new plant location and purchased a pasteurizer and related system, freezers, packaging machinery, pumping machinery, boilers, egg breaking equipment and shipping equipment. You further stated they had to hire seven new employees to operate the equipment and maintain the expanded facility. It is your opinion that the manufacturing part of XXXXX should be assigned SIC code 2017.

1. XXXXX's primary SIC code should be 5144.
   However, Sales Tax Rule R865-19-85S, in defining an "establishment" says, "where distinct and separate economic activities are performed at a single physical location, each activity should be treated as a separate establishment." The rule further states, new or expanding operations means activities which:

"(b)
are begun in a new physical plant location in Utah; or" .. . It is our understanding XXXXX meets this requirement. Egg drying, freezing and breaking does clearly fall under SIC code 2017, which is a qualifying code. XXXXX is entitled to the manufacturers exemption and a refund of tax already paid on qualifying equipment.

2. Qualifying machinery and equipment is
   machinery actually used in the production process. Machinery used for storage or distribution (shipping equipment) does not qualify for the exemption. Once the expansion is complete, additional purchases and replacements do not qualify for exemption.

3. The method for obtaining a refund is to
   issue a sales tax exemption certificate to vendors who collected tax on the sale and request a refund, or where sales or use tax was paid directly to the Tax Commission by XXXXX, apply to the Tax Commission for a refund.

For
the Commission,

Joe
B. Pacheco

Commissioner

September
24, 1990

Utah
State Tax Commission

Heber
M. Wells Building

160
East Third South

Salt
Lake City, Utah 84134

We
hereby seek a declaratory judgement for our client, XXXXX (the company), to qualify under Utah Tax Code R865-19-85S for an exemption from sales and use taxes. The company wishes to obtain this judgement from the Utah State Tax Commission so that charges for sales and use taxes from various vendors can be stopped and refunds can be received for past collections of sales and use taxes in error.

The
account number for our client is XXXXX. The standard industrial code for this account has been XXXXX, but is more correctly XXXXX.

In
February of 1988, the company started new and expanding operations. These operations were substantially different in nature, were begun in a new physical plant location, and increased production and capacity.

The
company meets the definition of a manufacturer in that it produces a new commodity from a raw material. The new product is a liquid or frozen egg product from a raw egg.

In
February of 1988, the company leased a new warehouse and plant facility and moved its operations to this facility. At that time one new production line was installed which was substantially different and more efficient than prior systems. This expansion required the purchase or lease of tangible personal property on which the company was and is being charged sales and use taxes. The property includes: pasteurizer and related system, freezers, packaging machinery, pumping machinery, boilers, and shipping equipment. In addition, the actual egg breaking equipment was installed at that time. The expansion required hiring five new employees to facilitate operation of the new equipment. Two new sanitation employees were hired to assist in the clean up and maintenance of the plant. The expansion has been an asset to the egg production business of Utah. The plant is now producing products for large national companies such as XXXXX, XXXXX and XXXXX. All of these products are produced from raw materials substantially purchased from Utah producers.

We
request your immediate attention to this matter and appreciate your cooperation. If you have any questions, please call or write to us at the above address.

XXXXX

Certified
Public Accountants

Attachment
is located in Tax Commission file 90-010DJ.