The State Tax Commission has ruled in large part in favor of Sanpete County in connection with Moroni Feed Co.'s application for a property tax exemption on the equipment used in two of its major operations.

Moroni Feed, the giant turkey cooperative, based its application for exemption on an amendment to the Utah constitution that was approved by the voters in the November 1986 general election. The amendment provides a property tax exemption for farm equipment and machinery.On the basis of the amendment, Moroni Feed Co. in 1987 applied for a tax exemption on the equipment at its hatchery and feed mill.

The Sanpete County Commission - Dr. Wendell H. McGarry, chairman, Robert Bessey and Keller Christensen, in their capacity as the county's Board of Equalization - denied Moroni Feed's application on the grounds that the property in question was not covered by the amendment.

Moroni Feed then appealed the Sanpete Board of Equalization ruling to the State Tax Commission.

The Tax Commission held an informal hearing on the issue in Salt Lake City on January 19.

The outcome of this hearing was an informal decision by the Tax Commission that the hatchery equipment should be exempt from the property tax, but that the company should continue to pay the tax on the feed mill machinery.

Moroni Feed Co. then asked the commission to reconsider its ruling on the feed mill.

That reconsideration has evidently resulted in no change. "We have now received written notice from the Tax Commission that it upholds its earlier decision," County Auditor Jay Alder said Tuesday.

That decision implies that the amendment on farm equipment and machinery applies only to items used in the production of agricultural products, but not to equipment used in their processing, Alder said.

The issue revolves around $25,000 in property taxes paid annually by Moroni Feed to Sanpete County. Of that amount, about $6,000 represents hatchery equipment, which will be tax exempt, and the remaining $19,000 feed mill machinery, which will continue to be taxable.

"The significance of the Tax Commission ruling is the precedent it has set," Alder said.

"The case was being closely watched by every county in the state and by private business," said Ross Blackham, Sanpete County attorney. "They were concerned to see which way it would go with its potential impact not only on taxation but on business planning."