Did a dental laboratory making custom dentures, artificial teeth, and orthodontic appliances qualify for Utah's manufacturing machinery-and-equipment exemption?

Plain-English summary

Utah Private Letter Ruling 91-010 addressed a dental laboratory seeking the manufacturing machinery-and-equipment exemption.

The laboratory made dentures, artificial teeth, and orthodontic appliances to order for dental professionals.

The Commission concluded that those activities fell under SIC 8072, a health-services classification rather than a manufacturing classification, and denied the exemption.

SIC 3843 did not apply

The requester pointed to SIC 3843, Dental Equipment and Supplies, as a potentially comparable manufacturing code.

The Commission said businesses in that code manufactured equipment, tools, and supplies used by dentists and dental laboratories.

The SIC manual specifically distinguished artificial teeth manufactured outside dental laboratories from products made by dental laboratories themselves.

Dental-laboratory classification

The Commission said dental laboratories whose primary activity was making dentures, artificial teeth, and orthodontic appliances to order were classified under SIC 8072.

That was not a manufacturing SIC code.

Narrow construction

The response stated that the Utah Supreme Court and courts in other states construed tax exemptions narrowly.

The Commission found it clear that the dental laboratory did not qualify under section 59-12-104(16).

Holding

Under the described activities:

• SIC 3843 did not cover products made in dental laboratories.
• Custom dental-laboratory work fell under SIC 8072.
• SIC 8072 was not a manufacturing code.
• The dental laboratory was not eligible for the claimed machinery-and-equipment exemption.
• The requester could appeal for a formal hearing and declaratory judgment.

What this means for you

Dental laboratories

Producing a physical dental appliance did not by itself establish manufacturing status under this historical SIC-based exemption.

Medical and dental product businesses

The distinction between custom laboratory work and manufacturing products outside a dental laboratory controlled the classification.

Accountants and tax professionals

Check the current exemption language, industry-classification framework, and whether a business operates a distinct manufacturing establishment.

Common questions

Q: Did the dental laboratory qualify for the manufacturing exemption?

A: No.

Q: Why did SIC 3843 not apply?

A: The Commission said that code covered dental equipment and supplies not made in dental laboratories.

Q: Which code applied to the laboratory?

A: SIC 8072.

Q: Did making tangible dental appliances automatically make the lab a manufacturer?

A: No.

Key source language

• SIC 3843 distinction: “These SIC codes, very clearly, are not assigned to dental laboratories.”
• Dental-lab classification: the manual placed made-to-order dentures, artificial teeth, and orthodontic appliances in “SIC code 8072.”
• Manufacturing status: SIC 8072 “is not a manufacturing SIC code.”
• Result: “a dental lab is not eligible for exemption under § 59-12-104(16).”

Citations and references

• Utah Code Ann. § 59-12-104(16)
• Standard Industrial Classification code 3843
• Standard Industrial Classification code 8072

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 91-010
• Scope note: the ruling addressed a laboratory whose primary activity was making dental products to order for the dental profession.
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

July
18, 1991 Response from Tax
Commission

June
11, 1991 Letter from XXXXX of
the XXXXX

XXXXX

Re:
SIC Code for Dental Lab

Dear
Mr. XXXXX:

This
letter is in response to your recent request for a Tax Commission ruling on whether a dental laboratory can qualify for the manufacturers exemption from sales and use tax as provided for by Utah Code Ann. Section 59-12-104(16). You provided certain manufacturing SIC codes which you felt performed similar functions.

In
comparing the activities covered by SIC Code 3843, Dental Equipment and Supplies, to a dental laboratory, businesses covered by SIC Code 3843 manufacture equipment, tools and supplies used by dentist and dental labs. The SIC code manual for 3843 indicated that if artificial teeth are manufactured as well as other dental equipment, tools and supplies, that they are those which are not made in dental laboratories. These SIC codes, very clearly, are not assigned to dental laboratories.

2.
The manual classifies dental labs who's primary activity is making dentures, artificial teeth, and orthodontic appliances to order for the dental profession in SIC code 8072, which is not a manufacturing SIC code.

The
Supreme Court of Utah and also courts from many other states have ruled that exemptions from taxation must be construed narrowly. It is very clear that a dental lab is not eligible for exemption under 59-12-104(16).

For
the Commission,

Joe
B. Pacheco

Commissioner

Commissioner
Joe Pacheco

State
Tax Commission

Heber
J. Wells Building

160
East 300 South

Salt
Lake City, UT 84111

Dear
Commissioner Pacheco:

About
a month ago I spoke with you regarding the appeals process for a business that feels they qualify for the manufacturing machinery and equipment exemption for sales tax. I advised the firm of the process, however, they were under construction and didn't believe they could complete the process to meet their move schedule.

As
I have reflected on this request which would have been submitted by a dental laboratory, I am concerned that there are instances where both dental and medical laboratories are engaged in the true manufacturing of equipment or products, yet because they are assigned to the Health Services classification they carry an SIC code of 8071 and 8072. Thus, they are outside the SIC codes classifications of 2000 to 3999 which do qualify.

Yet,
when I reviewed a list of businesses that would qualify, I found several that appear similar to the dental laboratory:

3841
Surgical and Medical Instruments

3842
Surgical Appliances and Supplies

3843
Dental Equipment and Supplies

3851
Ophthalmic Goods

3999
Manufacturing Industries (not elsewhere classified)

It
would appear there could be a misunderstanding regarding the definition a dental laboratory and perhaps a review of such facilities would be appropriate.

Would
you please give this issue some thought, and if in fact you believe there is merit in the request, perhaps the issue could be reviewed by the Tax Commission.

I
appreciate your openness and appreciated the information you shared with our office. If our office can be of service to you, please let me know.

Sincerely,

XXXXX

Vice
President

XXXXX