00-1024
SALES TAX
SIGNED 3/30/01
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
PETITIONER, )
) ORDER
Petitioner, )
) Appeal No. 00-1024
v. ) Account No. #####
)
AUDITING DIVISION OF ) Tax Type:
Sales Tax
THE UTAH STATE TAX )
COMMISSION, ) Presiding: Davis
)
Respondent. )
_____________________________________
Presiding:
G. Blaine Davis,
Administrative Law Judge
Appearances:
For Petitioner: PETITIONER REP, Representative for
Petitioner
For Respondent: Ms. Susan Barnum, Assistant Attorney
General
Mr. Bert Ashcroft, from
the Auditing Division
Mr. Scott Smith, from
the Auditing Division
STATEMENT
OF THE CASE
This matter came before
the Utah State Tax Commission for an Initial Hearing pursuant to the provisions
of Utah Code Ann. '59-1-502.5, on January
22, 2001.
Respondent issued an audit
report on Petitioner's business assessing additional sales and use taxes. Some of the issues in that audit report have
been resolved by agreement between Petitioner and Respondent. One additional issue involving an exemption
certificate on one particular sale still remains unresolved, and Petitioner
will try to obtain the exemption certificate for that sale. If Petitioner obtains an acceptable
exemption certificate, no tax will be imposed on that sale. If they do not obtain such an exemption
certificate, then Petitioner has agreed to pay the tax on that sale.
A further issue involves
accounting matters for certain sales, and if those sales are picked up in the
next audit period, then no tax will be imposed, but if those sales were not
accounted for in the subsequent audit period, then Petitioner has agreed to pay
the tax.
The issues presented for
resolution in the Initial Hearing are, first, whether certain amounts received
by Petitioner, and shown on the invoices as either "sales tax" or
"sales tax and fees" in excess of the legally required amount of
sales tax must be remitted to the Tax Commission; and second, whether the
purchase of furniture purchased to enhance the appearance of model homes is
subject to sales and use tax.
Petitioner produces
manufactured homes which are subsequently transported to a parcel of property
for installation. Pursuant to Utah Code
Ann. '59-12-104(37)(a),
"%%%%% of the sales price of any new manufactured home" is exempt
from sales and use tax.
When Petitioner purchased
the materials which were used to construct the manufactured homes, it correctly
paid use tax on the purchase of such materials.
When Petitioner sold its
manufactured homes on the invoices of %%%%% of such sales it showed an amount
as "sales tax". In
approximately %%%%% of those invoices, the amount shown as "sales
tax" was exactly the amount that should have been charged if the entire
sale was subject to sales tax. For the
other %%%%% of such sales, it is unknown how the amount of such "sales
tax" was determined. As a result
of that practice, Petitioner received approximately $$$$$ of "sales
tax" in excess of the legally required amount of sales tax on %%%%% of the
sale (%%%%% of the sale minus the %%%%% exemption pursuant to statute).
On %%%%% of the sales of
Petitioner, the invoices contained a line which said "sales tax and
fees." On those sales,
approximately %%%%% of the "sales tax and fees" was identical with
the amount that would have been due if sales tax was charged on the entire
amount of the sale. On the other %%%%%
of such sales, it is unknown how the amount of "sales tax and fees"
was determined. Based upon such sales,
Petitioner received approximately $$$$$ more than it would have been required
to collect and pay if the sales tax had been properly applied to only %%%%% of
such sales and the other %%%%% was treated as exempt from sales and use tax.
No "fees" are
specifically identified on the invoices, and Petitioner does not allege that
there were any particular "fees" that were supposed to be reimbursed
by such amounts on the invoices.
Most of the homes
manufactured by Petitioner are transported to a parcel of land and are attached
to that land by Petitioner. The
position of Petitioner is that such activities make it a real property
contractor, and exclude it from being a vendor under the terms of the statutes
and rules applicable to sales tax transactions.
At least two
manufactured homes were sold by Petitioner as tangible personal property, and
were not attached to the land by Petitioner.
The Tax Commission
issues a consumer sales tax number called an "H" number for
contractors who have no retail sales.
The Commission issues a regular retail sales number for retailers. Petitioner has been issued a regular retail
sales tax number, not an "H" number for contractors who do not have
retail sales.
To promote sales during
the audit period, Petitioner used some of its manufactured homes as model homes
and furnished those homes with furniture to demonstrate the appearance of such
homes as they might appear with people living in them. The model homes and furniture in those homes
are still in use in those homes, and none of the furniture has been sold. Petitioner is not regularly engaged in the
business of selling furniture.
APPLICABLE
LAW
Utah Code Ann. '59-12-104(37)(a) exempts
%%%%% of the sales price of any new manufactured home from sales and use tax.
Utah Administrative
Code, Rule R865-19S-4.A provides:
"Vendors shall not in any way waive the
collection or imposition of the tax.
Invoices and receipts shall show the tax collected as a separate
item. Vendors are required to remit to
the Tax Commission all funds in possession and are guarantors of all amounts
required to be collected."
Utah Administrative
Code, Rule R865-19S-4.B provides:
"If vendors collect
an excess amount of tax, they must either refund such excess to their customers
or remit it to the Tax Commission.
However, vendors may first offset undercollections of tax on sales
against any excess tax collected in the same quarterly reporting period. Vendors may not offset underpayment of tax
on purchases, whether the purchases are from in state or out of state
sources."
Utah Code Ann. '59-12-102(33)(a)
provides as follows:
"'Vendor' means any
person receiving any payment or consideration upon a sale of tangible personal
property or any other taxable transaction under Subsection 59-12-103(1), or to
whom the payment or consideration is payable."
Utah Administrative Code
Rule R865-19S-82.A provides:
"Tangible personal
property purchased by a wholesaler or a retailer and held for display,
demonstration or trial in the regular course of business is not subject to
tax. Examples of this are a desk bought
by an office supply firm and placed in a window display, or an automobile
purchased by an auto dealer and assigned to a salesman as a demonstrator.
Utah Code Ann. '59-12-107(2)(f) states:
"If any vendor, during any reporting
period, collects as a tax an amount in excess of the lawful state and local
percentage of total taxable sales allowed under this part and Part II, Local
Sales and Use Tax Act, the vendor shall remit to the Commission the full amount
of the tax imposed under this part and Part II, Local Sales and Use Tax Act,
plus any excess."
DISCUSSION
Regarding the amounts
received in excess of the legally required sales tax rate, an amount totaling
approximately $$$$$, Petitioner makes two arguments. First, Petitioner claims it is not a "vendor" as defined
in the statute because it maintains it is a real property contractor and is not
a seller of tangible personal property.
Second, Petitioner argues that the $$$$$ of additional monies received
as "sales tax and fees" was really for fees and not sales tax, and
therefore it does not fall within Rule R865-19S-4 requiring customers to remit
the excess amount to the Tax Commission.
In this matter, the
Commission does not accept the arguments presented by Petitioner. The Petitioner may or may not be a real
property contractor, but Petitioner is a vendor. Those terms are not mutually exclusive. Petitioner has been issued a regular retail sales tax number for
retailers, and clearly has some retail sales.
Petitioner is included in the statutory definition of vendor because it
is an entity which receives any payment or consideration upon a sale of
tangible personal property. Further, it
is the entity "to whom the payment or consideration is payable." To be a vendor, it is not necessary that all
of their sales be subject to sales and use tax. When sales and use tax is being collected, the person or entity
to which "the payment or consideration is payable" is a vendor.
In addition, Rule
R865-19S-4 requires that invoices and receipts must show the tax collected as a
separate item, and then requires that the amounts collected must be remitted to
the Tax Commission. In this case,
Petitioner has shown on the invoices the amounts of sales tax which it has
passed on and imposed upon the purchasers of its products. Those amounts are not stated separately as
either sales tax or fees. Where the
consuming public would reasonably interpret the representations of Petitioner
to impose such charges as sales tax, and where any fees to be imposed are not
separately stated and there is no explanation for such additional fees, the
Commission finds that such amounts were received as sales tax. Therefore, under the statutes and rules,
Petitioner must remit to the Tax Commission all amounts collected as sales tax,
even if the tax included the words "and fees".
With respect to the
furniture used in the model homes, the position of Petitioner is that it is
exempt from tax because the furniture is held for display or demonstration of
the model home. The position of
Respondent is that the furniture is subject to tax "because the regular
course of business" of Petitioner is not the display and sale of
furniture, and it has, in fact, never sold any furniture. Therefore, Respondent maintains the
furniture is for the use of Petitioner, and is subject to sales and use tax.
Utah Administrative Code
Rule R865-19S-82.A provides:
"Tangible personal property purchased by a
wholesaler or a retailer and held for display, demonstration or trial in the
regular course of business is not subject to tax.
Examples of this are a desk bought by an office
supply firm and placed in a window display, or an automobile purchased by an
auto dealer and assigned to a salesman as a demonstrator."
The referenced authority
for this rule is Utah Code Ann. '59-12-104, which is the statutory provision for
exemptions from sales tax. There are
fifty (50) separate exemptions listed in that statute, but the only parts of
that statute which could provide a basis for an exemption on "personal
property purchased by a wholesaler or a retailer and held for display,
demonstration or trial in the regular course of business" are
subparagraphs 24 and 26. These
subparagraphs exempt: "(24) property stored in the state for resale,"
and "(26) property purchased for resale in this state, in the regular
course of business. . . ."
If the only statutory
provisions allowing the exemption in the rule for property "held for
display, demonstration or trial in the regular course of business" are the
"resale" provisions, then the only "display, demonstration or
trial" property for which there is a statutory exemption is that which is
purchased or held for resale.
Accordingly, if the
property purchased for use in the model homes of Petitioner was not for resale,
then it was not "purchased by a wholesaler or a retailer and held for
display, demonstration or trial in the regular course of business." Any other interpretation of the rule would
cause the rule to exceed the rule-making authority of the Commission.
DECISION
AND ORDER
Based upon the
foregoing, the Commission determines that the funds received by Petitioner as
either "sales tax" or "sales tax and fees" as shown on the
invoices was received as sales tax, and all of such taxes are required to be
remitted to the Tax Commission. The
Commission also determines that the
furniture which was purchased by Petitioner for the model homes was not
purchased for resale, and was therefore not "personal property purchased
by a wholesaler or a retailer and held for display, demonstration or trial in
the regular course of business. The
furniture purchased for the model homes was subject to sales and use tax at the
time it was purchased. The audit
assessment by Respondent is sustained, and the Petition for Redetermination is
denied. It is so ordered.
This decision does not
limit a party's right to a Formal Hearing.
However, this Decision and Order will become the Final Decision and
Order of the Commission unless any party to this case files a written request
within thirty (30) days of the date of this decision to proceed to a Formal
Hearing. Such a request shall be mailed
to the address listed below and must include the Petitioner's name, address,
and appeal number:
Utah
State Tax Commission
Appeals
Division
210
North 1950 West
Salt
Lake City, Utah 84134
Failure to request a
Formal Hearing will preclude any further appeal rights in this matter.
DATED this 30th day of March
, 2001.
____________________________________
G. Blaine Davis
Administrative Law Judge
BY ORDER OF THE UTAH STATE TAX
COMMISSION.
The Commission has
reviewed this case and the undersigned concur in this decision.
DATED this 30th day of March , 2001.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner