Opinion ID: 1372616
Heading Depth: 1
Heading Rank: 3

Heading: sale of tangible personal property

Text: We first address whether the Commission erred in determining that the sale of slag to L.A. Young was a sale of tangible personal property as defined by Utah Code Ann. § 59-12-102(13)(a)(iv). Utah law imposes a tax on retail sales of tangible personal property. Utah Code Ann. § 59-12-103(1)(a) (There is levied a tax on the purchaser for the amount paid or charged for ... retail sales of tangible personal property made within the state.). According to section 59-12-102(13), (a) Tangible personal property means: .... (iv) all other physically existing articles or things, including property severed from real estate. (b) Tangible personal property does not include: (i) real estate or any interest or improvements in real estate. RME characterizes its agreement with L.A. Young as a transfer of an interest in real estate and therefore not taxable under section 59-12-102(13)(b)(i). It argues that L.A. Young was given the right to enter upon its leasehold and extract slag, paying a royalty of sixty cents per ton. However, RME was not able to provide the Commission with a copy of any agreement between RME and L.A. Young that would indicate the transfer of a real property right. RME concedes that the agreement was more or less just an understanding. It asserts that although there was no formal instrument of conveyance, whether there was a transfer of an interest in land depends on the underlying arrangement of the transaction without regard to the form of the instrument. Stucki v. Ellis, 114 Utah 486, 201 P.2d 486 (1949) (finding that contract sufficiently manifested homestead rights in absence of record title). RME relies on Wasatch Mines Co. v. Hopkinson, 24 Utah 2d 70, 465 P.2d 1007 (1970), where we stated that when a transfer of an interest in land is involved, the better view is that it must be by deed. Id. at 74, 465 P.2d at 1010. However, we then considered the circumstances under which a document might be construed as a conveyance of an interest in land in the absence of a deed. In doing so, we focused on the document to see whether it identified the grantor, the grantee, and the interest granted or a description of the boundaries in a manner sufficient to construe the instrument as a conveyance of an interest in land. Id. After examining the written document, we held that the document did not identify the requisite elements in a manner sufficient to allow us to construe the instrument as a conveyance of an interest in land. Id. at 75, 465 P.2d at 1010. The agreement between RME and L.A. Young does not meet the standard set out in Wasatch Mines. Not only is there uncertainly regarding the interest granted and the boundaries of the alleged interest, but there is no written document for the court to analyze. Thus, the mere oral understanding between RME and L.A. Young that permitted L.A. Young to remove slag from the property does not rise to the level of an interest in land under the test established in Wasatch Mines. In addition, RME contends that it did not sell anything that had been severed from the land as required by section 59-12-102(13)(a)(iv) and that, therefore, the transaction could not be considered a sale of personal property. However, RME fails to take into account the fact that slag is the waste product of the copper-mining, milling, and smelting process, which involves the removal of valuable minerals from ore removed from the earth. Courts confronted with the task of attaching a property label on slag have treated it as both tangible personal property and real property. Compare Manson v. Dayton, 153 F. 258, 263 (8th Cir.1907) (concluding that slag was treated and dealt with as mere personality) with St. Louis Smelting & Refining Co. v. Hoban, 357 Mo. 436, 443, 209 S.W.2d 119, 123 (1948) (concluding that slag should be considered real property). However, even jurisdictions recognizing that slag may be considered real property acknowledge that the classification depends upon the surrounding circumstances. See Hayes v. Alaska Juneau Forest Indus., Inc., 748 P.2d 332 (Alaska 1988). We conclude that for sales tax purposes, when slag has been severed from the land in the mining process and placed in a pile, it is personal property and subject to taxation pursuant to section 59-12-102(13)(a)(iv).