Does Utah property, sales/use, or corporate franchise tax apply to copper, gold, silver, platinum, or palladium held in a Utah commodity-exchange depository warehouse before it's resold?

Plain-English summary

This record bundles several related Commission letters to the operator of a licensed commodity-exchange depository warehouse in Utah, covering both copper and precious metals.

On the copper question, the warehouse asked whether copper held in the warehouse — bought, quality-checked, and issued a tradeable "warrant" that could change hands multiple times before the copper ships out of state — would be subject to Utah property tax on the January 1 lien date. The Commission answered that Utah's inventory exemption (then §§ 59-2-17 to -21, later recodified as § 59-2-1113/1114) kicks in once the warrant is first sold, because at that point the copper has been sold to a buyer for resale and becomes exempt resale inventory.

The warehouse later sought a broader ruling to cover a planned gold, silver, platinum, and palladium depository as well (platinum and palladium were added once two commodity exchanges merged). The Commission's Auditing and Property Tax Divisions worked through three separate taxes:

• Sales/use tax: gold, silver, and platinum bars that are at least 80% pure are excluded from the statutory definition of "tangible personal property" altogether (with palladium treated as part of the platinum group), so their sale is exempt outright — not because of a resale exemption, but because the tax simply doesn't reach them.
• Property tax: metal "held exclusively for resale" in the warehouse is exempt inventory under § 59-2-1114, which exempts property held for sale in the ordinary course of business — a later clarification letter confirmed there's no separate requirement that resale inventory also ship out of state within 12 months (that 12-month clock only applies to a different category of exempt property — property being shipped to a final out-of-state destination). The warehouse's own real and personal property used to run the operation, however, stays taxable.
• Corporate franchise tax: out-of-state corporations that merely hold and trade the warehouse's negotiable receipts may technically have Utah nexus under the broad "doing business" definition (which includes owning property in the state), but most such traders fall under the "de minimis" activity threshold recognized in Wisconsin Dept. of Revenue v. William Wrigley Jr. Co. and Multistate Tax Commission guidance on P.L. 86-272, so they generally would not actually owe the tax — though any trader whose activity exceeds that de minimis level would.

What this means for you

Commodity warehouse and depository operators

If your Utah warehouse holds inventory that's genuinely available for resale (evidenced by negotiable receipts/warrants that transfer ownership), that inventory is property-tax exempt while it sits in your warehouse — you don't need to also show it will ship out of state within 12 months. But the warehouse's own operating property (the building, fixtures, equipment) stays taxable.

Precious metals dealers and traders

Gold, silver, and platinum bars at least 80% pure (and palladium, treated similarly) fall outside Utah's sales/use tax base entirely under § 59-12-102's definition of tangible personal property — this is a categorical statutory exclusion, not a resale exemption you have to document transaction-by-transaction.

Out-of-state traders holding warehouse receipts

Simply holding a negotiable warehouse receipt tied to Utah-stored inventory can technically create Utah "doing business" exposure for corporate franchise tax, but low-level trading activity is likely to fall under the de minimis standard. If your trading activity in Utah becomes more substantial, revisit whether you've crossed that line.

Common questions

Q: Does resale inventory in a Utah warehouse also have to leave the state within 12 months to stay property-tax exempt?
A: No. The Commission's clarification letter confirmed the "12 months to a final out-of-state destination" language applies to a separate category of exempt property; resale inventory is independently exempt simply for being held for sale in the ordinary course of business.

Q: Is all precious metal sold in Utah exempt from sales tax?
A: Only gold, silver, and platinum bars/ingots at least 80% pure (and comparably, palladium) — Utah's tax code excludes them from "tangible personal property" by definition. Jewelry, coins, or lower-purity items are not covered by this exclusion.

Q: Does this ruling apply to my warehouse or trading activity?
A: Not automatically. This is a private letter ruling binding only on the Commission as to this taxpayer's specific facts; another taxpayer can't rely on it as binding, though it may carry weight in a later appeal depending on how closely the facts match.

Citations and references

Statutes and rules:

• Utah Code Ann. § 59-2-1113/1114 (formerly §§ 59-2-17 to 59-2-21) (inventory property tax exemption)
• Utah Code Ann. § 59-12-103 (sales/use tax on tangible personal property)
• Utah Code Ann. § 59-12-102 (definition excludes 80%-pure precious metal bars)
• Utah Code Ann. § 59-7-101(9) (corporation franchise tax "doing business" definition)
• Wisconsin Dept. of Revenue v. William Wrigley Jr. Co. (1992) (de minimis P.L. 86-272 standard)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/94-008.pdf

Original ruling text

Response June 30, 1994

Request

February 12, 1987

XXXXX

Property Tax Division
XXXXX

Utah State Tax
Commission

160 East 300 South

Salt Lake City, Utah
84134

Dear XXXXX

Subject: XXXXX

The XXXXX in XXXXX is considering
opening a warehouse in Utah to handle copper produced by XXXXX. Sales Use tax
and property tax regulations will have a major impact on their decision and
they would like confirmation, in writing, as to the State Tax Commission's
position regarding property taxes.

The XXXXX warehouse
would operate as follows:

1.
XXXXX pays XXXXX an �in and out� fee plus storage and insurance fees.

2.
XXXXX weighs, checks the quality brand and prepares a negotiable
instrument called a �warrant� for each lot.
At this point, the warrant and copper is owned by XXXXX.

3. XXXXX sells the warrant through XXXXX
   at XXXXX price plus 1.5� premium, one-half of the in/out fee and prorated
   storage costs. Title to the copper passes to the buyer of the warrant.

4.
The warrant could be sold several times before the copper is actually
shipped out of state by XXXXX.

Please advise if there
would be property tax on the January 1 inventory of copper in the XXXXX
warehouse; in other words, would the January 1 inventory be exempt from
property tax under Section 59-2-17, 59-2-18.

Your early response
will be appreciated since XXXXX and XXXXX are anxious to proceed.

Very truly yours,

XXXXX

Dear XXXXX,

This is in response to
your letter dated XXXXX regarding XXXXX consideration of opening a warehouse in
Utah to handle copper produced by XXXXX and the State Tax Commission�s position
regarding property taxes under the scenario stated in your letter.

Pursuant to section
59-2-1113 (formally sections 59-2-17 to 59-2-21), the property tax exemption
applies to tangible personal property held for sale in the ordinary course of
business or for shipping to a final out-of- state destination within twelve
(12) months. The Property Tax exemption will apply once the �warrant� is sold
to XXXXX. At that point, it is our
opinion that the copper has been sold to a buyer for resale.

If you have any
questions regarding the above, please do not hesitate to contact our office.

Sincerely,

XXXXX

Utah State Tax
Commission

Office of the
Commissioners

Heber M. Wells Office
Building

160 East, 300 South

Salt Lake City, Utah
84134

Gentlemen:

We have been exploring
the possibility of establishing a XXXXX registered warehouse in Utah for the
storage of gold and silver. Connect and two precious metal refineries produce
these metals in Utah. A significant
quantity of the total United States refined precious metals is produced in
Utah.

We have discussed the
concept of operating a precious metals depository with XXXXX sales department,
other gold mining companies the independent refineries and with major gold and
silver traders. All have expressed
interest in the idea and many have indicated that they would support our
application and would use the facility

Currently XXXXX has
depositories only in the XXXXX. We
believe that we have a strong case for obtaining a license for a depository in
Utah and will present our application to XXXXX when we have met all of their
other requirements.

Gold and silver are
delivered to the XXXXX depositories in 100 and
ounce bars respectfully, the quantity of metal designated as one futures
contract. A negotiable warehouse receipt is prepared for each lot. The receipts are traded among the various
market participants; producers, fabricators, merchants and speculators. The holder of the receipt is the owner of a
right to receive a specific lot of gold or silver identified by a lot number in
a specific XXXXX depository. These negotiable receipts can trade dozens of
times before the gold or silver is removed for ultimate use. All gold and silver held in a depository is
held exclusively for resale and is not in a form usable by an end consumer

All sales of metal
through a XXXXX depository are sales for resale of the commodity in its present
form or sale for further fabrication and resale of the fabricated product.
Therefore, XXXXX requires that such sales be exempt form sales\use tax,
franchise/income tax and property tax.
We request that you give us an exemption from these taxes for all
transactions on XXXXX related to precious metals stored in Utah.

In XXXXX asked the
Utah State Tax Commission for a similar ruling concerning the storage of copper
which is traded on the XXXXX. The Tax Commission agreed that the above taxes
were not applicable to copper traded on the exchange. Subsequently we established a XXXXX licensed warehouse for copper
in XXXXX, Utah which has been successful.

Thank you for your
assistance. If you need any further
information, please contact us. If
desired we will meet with you or other members of the Utah State Tax
Commission.

Sincerely yours,

XXXXX

XXXXX

Utah State Tax
Commission

Office of the
Commissioners

Heber M. Wells Office
Building

160 East, 300 South

Salt Lake City, Utah
84134

Dear Mr. Oveson:

Subsequent to sending
our letter of XXXXX concerning an exemption from certain taxes related to the
sale of gold and silver through a Commodity Exchange depository we learned that
XXXXX will merge with the XXXXX. The precious metals platinum and palladium are
traded on the XXXXX. Initially we had
not planned to store these metals.
Since XXXXX and XXXXX will be merged we plan to add platinum and
palladium to our license.

We request that the
Utah State Tax Commission add these metals to the exemption from taxes for all
transactions on XXXXX related to precious metals stored in Utah.

Thank you for your
assistance. If you need any further
information, please contact us.

Sincerely yours,

XXXXX

Re: Advisory Opinion - Sales/Use Tax,
Franchise/Income Tax, and Property Tax Exemption for All Transactions on XXXXX
and XXXXX Related to Gold, Silver, Platinum and Palladium Bars Stored in Utah

Dear XXXXX:

Your requests for an
advisory opinion (copies attached) as to whether all transactions on XXXXX and
XXXXX related to gold, silver, platinum, and palladium bars stored in Utah
qualify for exemption under the Utah Sales and Use Tax Act, Corporation
Franchise Tax Act, and property tax statute, were referred to the Auditing
Division and the Property Tax Division for their analysis.

The Auditing
Division's staff recommendations with regard to sales/use tax and corporation
franchise/income tax are as follows:

1.
Utah Code Annotated Section 59-12-103 (copy attached) levies the sales
or use tax on sales of tangible personal property to final consumers.

2.
UCA Section 59-12-102 (copy attached) excludes from the definition of
tangible personal property �all gold, silver or platinum ingots, [and] bars...
with a gold, silver, or platinum content of not less than 80%.�

3.
Palladium is also excludable as being part of the platinum group of
precious metals.

4.
Sales of gold, silver, platinum and palladium bars are, therefore,
exempt from the Utah sales or use tax if the 80% content requirement is met.

5.
For Utah corporation franchise tax, it is first necessary to clarify that
Utah Commodity Storage Warehouse is a Utah corporation which has elected 'S'
corporation status under the IRC and is itself subject to and filing Utah small
business corporation franchise tax returns. It is our understanding that the
request for exemption in the letter dated April 22, 1994 applies only to
corporations which would buy and sell the negotiable warehouse receipts and
does not apply to Utah Commodity Storage Warehouse itself.

6.
Under the current Utah statutes and rules, the holding of the negotiable
warehouse receipt by corporations even though domiciled outside of Utah may
create taxability under the Utah corporation franchise tax statute. U. C .A.
59-7-101(9) defines �doing business� to include �...the owning, renting or
leasing of real or personal property within this state.�

7.
Notwithstanding the above, it appears that many of the corporations
buying and selling the warehouse receipts would not be subject to the
corporation franchise tax based on their �de mittimus� level of activity as
outlined in Wisconsin Department of Revenue v. William Wrigley Jr. Co.,1992
and in the Statement of Information Concerning Practices of Multistate Tax
Commission and Signatory States Under Public Law 86-272 which has been adopted
by the Utah State Tax Commission. Nevertheless, any corporations whose
activities exceed the �de minimus� standard would be subject to the Utah
corporation franchise tax.

The Property Tax
Division's staff recommendations with regard to property tax are as follows:

Utah Tax Code 59-2-1114 states in part:

�Tangible personal property present in
Utah on January 1, noon, held for sale in the ordinary course of business or
for shipping to a final out-of-state destination within 12 months and which
constitutes the inventory of any retailer, wholesaler, distributor, processor,
warehouseman, manufacturer, farmer or livestock raiser, is exempt from property
taxation.�

Based upon the representations made in
your letters, the gold, silver, platinum and palladium, "held exclusively for
resale" is exempt from property taxation in the state of Utah.

We might note that the real and personal
property used in the warehouse operation would be subject to taxation under the
property tax law in the state.

Based upon the facts
presented in your letters, 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.

For The Commission,

Alice Shearer

Commissioner

RE: Clarification of Advisory Opinion
dated XXXXX

Dear XXXXX:

On XXXXX the Tax Commission sent you an
advisory opinion concerning transactions on XXXXX and XXXXX related to gold,
silver, platinum and palladium bars stored in Utah. That advisory opinion
addressed the corporation franchise tax, sales tax and property tax
consequences of these
transactions. Since receiving that
advisory opinion you have requested clarification of the property tax portion
of the advisory opinion. This issue was
referred to the Property Tax Division for further analysis.

They respond as follows:

The advisory opinion referenced Utah Code Section
59-2-1114, which is the section that exempts inventory from property taxation
as personal property. According to your
letter of XXXXX. �All sales of metal
through a XXXXX depository are sales for resale of the commodity in its
present form or sale for further fabrication and resale of the fabricated
product.� The portion of Section
59-2-1114 that is relevant to this issue reads �. . . held for sale in the
ordinary course of business . . .�
There is no requirement for resale inventory to be sold or shipped out
of the state within 12 months. The word
�or� which appears before the phrase in the section that reads�. . . for
shipping to a final out-of-state destination within 12 months� excludes resale
inventory. In other words, to be
exempt, personal property must either be resale inventory or be shipped
out-of-state within 12 months.
Furthermore, subsection (3) of 59-2-1114 clarifies that exempt inventory
includes �. . . materials, . . . goods in process, finished goods . . .�

Therefore, based on your letter, the gold,
silver, platinum and palladium, �held exclusively for resale� is exempt from
property taxation in the state of Utah.

These letter opinions are kept on
file. We hope this informal process is
helpful to you.

For the Commission,

Alice Shearer

Commissioner