85-0118 - Sales




XXXXX,                                                                                 :


            Petitioner                                                          :           FINDINGS OF FACT,

                                                                                    :           CONCLUSIONS OF LAW

v.                                                                                 :           AND FINAL DECISION


AUDIT DIVISION OF THE                                       :

STATE TAX COMMISSION OF UTAH,                  :           Appeal No. 85-0118


            Respondent                                                      :



            This matter came before the Utah State Commission for a Formal Hearing on XXXXX.  The entire Tax Commission was present with Roger O. Tew conducting the proceedings.  XXXXX, Assistant Attorney General, appeared on behalf of the Respondent XXXXX and XXXXX appeared representing the Petitioner and XXXXX.  After reviewing the evidence and arguments presented at the Formal Hearing the Tax Commission makes its:


            1. XXXXX entered into two major construction projects involved XXXXX.  One of these projects involved remodeling and constructing, medicinal facilities on the XXXXX.  The other project involved the construction of the new XXXXX together with the adjoining parking lot of the athletic fields.

            2. The XXXXX undertook the responsibilities of the construction project itself.  Rather than hire a prime contractor the school district acted as the prime contractor for both projects.  To act as prime contractor the school district hired XXXXX to oversee the project.

            3. Mr. XXXXX was hired and given an office in the school district's offices.  He was designated to represent the school district in performing its duties as the prime contractor.  The school district then entered into twenty-two separate contracts with various businesses for the construction of the XXXXX and eight businesses for the work to be performed at the XXXXX.

            4. The contracts included site preparation, mechanical, electrical, general construction, educational equipment, carpet, lockers, bleachers, library shelving, shop equipment, auditorium seating, state equipment, state lighting, gym flooring, athletic track, fencing, sprinkling system, Toro equipment, tennis courts, and stadium seating.

            5. One of the twenty-two contracts was let to XXXXX.  XXXXX was to provide general construction on the main building and a few other items.

            6. As part of the contract, the school district reserved the rights in all of its contracts to purchase the materials to be used in the construction of the two facilities.  That provision provided "The owners (school district) shall have the right to furnish any part or all of the materials and equipment which shall become a part of the permanent structure."

            7. If the school district elected to furnish the materials it would issue a purchase order to the vendor, the vendor would then deliver the materials to the job site.  Upon delivery to the job site title to the materials would pass directly from the vendor to the school district.  The school district had the responsibility of paying for the materials.

            8. The school district exercised its option on all of its contracts on the two projects to purchase and furnish materials.

            9. The school district secured lists and specifications through XXXXX from the various contractors.  The school district then issued change orders to the various contractors deleting the need to supply the materials and the cost of the materials from the contract.  The school district then issued a purchase order directly to the vendor for the materials.

            10. The contracts with the various subcontractors then became labor only contracts.  The vendor supplied all materials vendor then billed the school district for the materials which paid for the materials by check issued directly from the school district.

            11. All vendors billed and receive payment from the school district and did not look for payment from the contractors.

            12. All warranties on the materials run to the school district and the school district was and is responsible for enforcing any and all warranties.

            13. School district provided insurance coverage for the materials after purchase and through construction of the building.

            14. School district was the owner of all surplus materials.

            15. School district inspected the materials when they arrived on the job site and then at times refused delivery of defective materials.  Based upon the foregoing Findings of Facts, the Commission enter its


            1. Petitioner did not purchase the materials used in the construction of the XXXXX and therefore it is not liable for the payment of sales tax on those materials.

            2. Purchase of materials by the XXXXX are exempt from sales tax pursuant to Utah Code Ann.  59-15-6 (1986).

            3. The materials used by the Petitioner in the construction of the XXXXX were purchased and owned by the XXXXX are exempt from sales tax.


            Therefore it is hereby decided that the sales tax assessment against the Petitioner, XXXXX, for the period of XXXXX through XXXXX and the accompanying penalties and interest be rescinded.

            DATED this 25 day of November, 1987.


R. H. Hansen                                                                Roger O. Tew

Chairman                                                                      Commissioner

Joe B. Pacheco                                                            G. Blaine Davis

Commissioner   Commissioner