85-0112 - Sales




XXXXX,                                                                                 )


            Petitioner,                                                         )

                                                                                    :           DECISION FROM

v.                                                                                 )           INFORMAL HEARING


AUDIT DIVISION OF THE                                       )

UTAH STATE TAX COMMISSION,                        :           Appeal No. 85-0112


            Respondent.                                                     :



            An Informal Hearing was held on XXXXX.  Commissioner XXXXX heard the matter for the Commission.  Petitioners were represented by XXXXX, XXXXX and XXXXX.  The Respondent was represented by XXXXX, Assistant Attorney General for the state of Utah, XXXXX and XXXXX.

            The Petitioners were purchasing sawdust and selling this product to XXXXX to be used in well drilling operations.  The product was delivered directly to the driller under contract to XXXXX, but it was invoiced to and paid for by XXXXX.  The sawdust was purchased from several local distributors and no sales tax was paid on that purchase nor was it collected on the sale to XXXXX.

            Petitioners argued that they considered themselves a wholesaling operation, and therefore, did not collect or pay a sales tax on their transactions.  Petitioners did acquire a sales tax license, but have not filed a sales tax return or paid any sales tax.  The Petitioners did not require a sales tax exemption number or verification from XXXXX of their wholesale status.  The Petitioner argued that the purchase and sale of the sawdust is exempt from taxation because of the agricultural exemption in the Utah Code.  The Petitioner further argued that the statute of limitations should apply and bar the determination of the Respondent.

            The Respondent presented evidence that sawdust does not qualify for an agriculture exemption because it was not produced by the Petitioner.  Further evidence was presented that the sale of sawdust was not a wholesale sale because Petitioner did not bear his burden of proof to show a valid exemption certificate or a statement from XXXXX to substantiate that the transaction was an exempt one.  The Respondent argued that the statute of limitations had not yet started to run where there is a failure to file a sales tax return.


            The Tax Commission, after reviewing the file and the evidence presented at the Informal Hearing and the recommendation of the Hearing Officer, finds that

            1. The Petitioner is not a producer of the sawdust who is therefore entitled to the agricultural product exemption (Utah State Tax Commission Regulation S-39).

            2. XXXXX did not hold a wholesaler license.  The Petitioner did not present a valid exemption certificate or statement from XXXXX to substantiate that the sales to XXXXX was a wholesale transaction (Utah State Tax Commission Rule S-23(2-e).)

            3. The statute of limitations begins to run when the Petitioner files a sales tax return.  Since no return was filed in this matter, the statute of limitations has not yet commenced to run, and therefore, the argument that the statute of limitations has run does not apply.

            4. The Petitioners failed to shift the burden of proof to the Respondent.


            Based upon the foregoing, it is hereby ordered that Petitioner's request for redetermination be dismissed.

            DATED this 26 day of December, 1985.


Mark K. Buchi                                                             Gary C. Cornia

Chairman                                                                      Commissioner

R. H. Hansen                                                                Roger O. Tew

Commissioner   Commissioner