BEFORE THE STATE TAX COMMISSION
OF UTAH
_____________________________________
XXXXX ) INFORMAL DECISION
v. :
AUDITING
DIVISION OF THE : Appeal No. 87-0146
STATE TAX
COMMISSION OF UTAH, ) Sales Tax No. XXXXX
Respondent. :
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for an Informal Hearing on
XXXXX. James E. Harward, Hearing
Officer, heard the matter for the Tax Commission. XXXXX, XXXXX and XXXXX appeared representing the Auditing
Division. XXXXX representing the
Petitioner. The Petitioner's primary
function is to inspect oil field tubular pipe.
As a secondary function, the Petitioner will also repair that pipe when
requested to do so by the client.
During the audit test period, i.e., XXXXX, twelve invoices for eleven
different customers were examined. Two
invoices had only inspection work performed but no repairs. Four invoices had inspection work performed
plus a separate charge for a cleaning of threads and application of thread
lubricant with no repairs. One invoice
had inspection work performed and XXXXX performed the repairs to correct the
problems disclosed by one type of inspection.
One invoice had inspection work performed and a third party performed
the required repairs. Four invoices had
no inspection performed but rather repairs such as pipes straightened,
etc. The issue is whether or not the
services performed by XXXXX of inspecting tubular pipe are taxable. In conjunction with the inspection service,
the Petitioner is required to clean and lubricate threads to the pipe. The method of inspection include a
hydrostatic and an ultra sound method.
The Respondent argues that the service performed by the Petitioner are
the nature "services for repairs, renovations, cleaning or washing of tangible
personal property or for installation of tangible personal property rendered in
connection with other tangible personal property." Utah Code Ann. 59-15-4(1)(e). Rule 78S also provides for "persons who
wash, clean, repair, renovate tangible personal property where the material is
furnished by seller or not, required to collect the sales tax upon the total
charge made for the rendition of such services."
DECISION AND ORDER
The
Tax Commission after reviewing the evidence presented at the informal hearing
conclude that the services provided by the Petitioner also include washing,
cleaning, repairing, and renovating and are, therefore, subject to tax. The Tax Commission further recognizes the
problems that this may create for the taxpayer and therefore makes the
application of this decision prospective from the notice of the audit. Therefore, the audit is adjusted to delete
any taxes assessed in the audit as it relates to service contracts for
cleaning, repairing, and inspection.
The Auditing Division is ordered to adjust its records in conformance
with this decision.
DATED
this 21 day of December, 1987.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Joe
B. Pacheco
Chairman Commissioner
G. Blaine
Davis Roger
O. Tew
Commissioner Commissioner