Did manufacturing have to fall within SIC codes 2000 through 3999 for Utah's fuel-and-electricity exemption, and did producing prepackaged software qualify?
Apply this to your situation
This page answers the general question as of 1992. Ask about yours and see what current Utah tax law says, with citations.
Plain-English summary
Utah Private Letter Ruling 92-040 addressed how the manufacturing concept in Rule R865-19-35S applied to fuel and electricity.
The rule treated qualifying fuel used in manufacturing, producing, or compounding a product for resale as noncommercial consumption.
The Commission said manufacturing was not limited exclusively to activities within Standard Industrial Classification codes 2000 through 3999. An activity within those codes could qualify, however, if it also met the predominant-use test.
The Commission separately concluded that producing prepackaged software under SIC code 7372 was a professional service, not manufacturing or producing a product for resale. That activity did not qualify.
Manufacturing and SIC codes
The requester asked whether “manufacturing” in Rule R865-19-35S meant only activities within SIC codes 2000 through 3999.
The Commission said the rule itself did not contain that limitation.
It nevertheless found it reasonable to conclude that an activity within those manufacturing codes was entitled to the fuel-and-electricity exemption when the predominant-use test was satisfied.
Prepackaged software
The requester also asked whether the rule's separate phrase about “producing or compounding of a product which will be resold” covered prepackaged software under SIC code 7372.
The Commission said no.
It classified that activity as a professional service rather than manufacturing, producing, or compounding a product for resale.
Holding
Under the stated facts and historical rule:
- Rule R865-19-35S did not expressly require manufacturing to fall within SIC codes 2000 through 3999.
- Activities within those codes could qualify if the predominant-use test was met.
- Producing prepackaged software under SIC 7372 was not qualifying manufacturing or production.
- The Commission treated the software activity as a professional service.
- Deviations from the presented facts could negate the opinion.
What this means for you
Manufacturers and energy managers
An industry code alone did not complete the exemption analysis. The activity also had to satisfy the predominant-use test described by the Commission.
Software companies
This 1992 ruling treated producing prepackaged software as a professional service for this fuel-and-electricity exemption, despite the software being intended for resale.
Accountants and tax professionals
Check the current rule, current software-tax provisions, and the actual energy-use measurement before applying this historical opinion.
Common questions
Q: Did manufacturing have to be within SIC codes 2000 through 3999?
A: No. The Commission said the rule contained no such requirement.
Q: Could an activity within those codes qualify automatically?
A: Not automatically. It also had to meet the predominant-use test.
Q: Did producing prepackaged software under SIC 7372 qualify?
A: No.
Q: How did the Commission classify that software activity?
A: As a professional service.
Key source language
- SIC limitation: “rule 35S does not contain a requirement that manufacturing activities fall within the SIC codes 2000 to 3999.”
- Predominant use: qualifying coded activities were entitled to exemption “providing the predominant use test is met.”
- Software classification: “The activity of producing prepackaged software under SIC code 7372 is not considered manufacturing or producing or compounding of a product which will be resold.”
- Service conclusion: “That activity is deemed to be a professional service.”
Citations and references
- Utah Admin. Rule R865-19-35S
- Standard Industrial Classification codes 2000 through 3999
- Standard Industrial Classification code 7372
Source
- Landing page: Utah Private Letter Rulings
- Official ruling: Utah PLR 92-040
- Scope note: the Commission said deviations from the presented facts could negate the opinion.
- Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.
Original ruling text
92-040
Response October 12, 1992
Letter
October 12, 1992
XXXXX
Tax Consultant
Re: Noncommercial Use of Fuels and Electricity
Dear XXXXX:
Your request for an advisory opinion regarding whether the term "manufacturing" contained in rule R865-19-35S means those activities which fall under SIC coded 2000 through 3999 has been referred to the Auditing Division for their analysis. It is the division staff recommendation that:
1. Although rule 35S does not contain a requirement that manufacturing activities fall within the SIC codes 2000 to 3999, it is reasonable to conclude that if an activity does fall within those SIC codes they are entitled to exemption from sales tax on fuel and electricity providing the predominant use test is met.
2. The activity of producing prepackaged software under SIC code 7372 is not considered manufacturing or producing or compounding of a product which will be resold. That activity is deemed to be a professional service.
Based upon the facts presented in your letter, we are in agreement with the Auditing Division's recommendations. Obviously, if there are deviations from these facts, this opinion may be negated.
If you do not agree with this determination, you may appeal to the Tax Commission for a formal hearing. The results of that hearing would constitute a declaratory judgment and be appealable to the Utah State Supreme Court. A Notice of Appeal Rights and a copy of the Utah Taxpayer Bill of Rights are attached.
To arrange for Americans with Disabilities Act accommodations, please contact the Tax Commission at (801) 530-6920, (801) 530-6077 or TDD (801) 530-6269 allowing three working days notice.
For the Commission,
Joe B. Pacheco
Commissioner
September 14, 1992
Joe Pacheco, Commissioner
Utah State Tax Commissioner
160 East 300 South
Salt Lake City, Utah 84134
Re: R865-19-35S
Dear Commissioner,
The above mentioned rule states in part the following:
B. "Noncommercial consumption" is defined as fuel used in:
3. use in manufacturing tangible personal property or use in producing or compounding of a product which will be resold.
Does the term "manufacturing" as used here mean those activities which fall under the SIC codes 2000 thru 3999.
Does the second part of paragraph 3 (or use in producing or compounding of a product which will be resold) refer to products not referred to in SIC codes 2000 thru 3999 such as 'Prepackaged Software' under 7372.
Thank you for your help in this matter.
Respectfully,
XXXXX
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