BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
Petitioner, : FINDINGS OF FACT,
: CONCLUSIONS
OF LAW
v. : AND FINAL DECISION
: Appeal No.
87 1269
AUDIT DIVISION
OF THE :
STATE TAX
COMMISSION OF UTAH, ) Account No. XXXXX
Respondent. :
_____________________________________
This
matter came before the Utah State Tax Commission for a formal hearing pursuant
to the Rules of Administrative Procedure on XXXXX. James E. Harward, Presiding
Officer, heard the matter for and in behalf the Tax Commission. XXXXX, Assistant Attorney General, and XXXXX
appeared representing the Respondent.
XXXXX appeared representing the Petitioner. After reviewing the facts and evidence presented at the hearing
and the recommendation of the Presiding Officer, the Tax Commission makes its
FINDINGS OF FACT
1.
Petitioner was incorporated in XXXXX.
2.
The nature of the business of the Petitioner is to sell computer systems and
software.
3.
The Petitioner is not in the business of selling small personal computers to
individuals. It is more in the nature
of selling large systems to businesses.
4.
The Petitioner is representative and distributor of XXXXX.
5.
A XXXXX computer was purchased from XXXXX and installed and used at the Petitioner's
place of business.
6.
Personal business of the Petitioner was done on the system as well as
demonstration to potential purchasers.
7.
Initially the Petitioner capitalized the XXXXX, and took this depreciation
later.
8.
The system was ultimately sold to XXXXX.
9.
The system was purchased in XXXXX and sold to XXXXX in XXXXX.
10.
The Petitioner also purchased a XXXXX in XXXXX and sold it in XXXXX.
11.
The testimony would indicate that the systems were used for inhouse business
about 20% of the time.
12.
It is a regular course of the Petitioner's business to sell and service
computer products. In conjunction with
the purpose and regular course of business it would also require that a
demonstration model be available to show to potential customers its capability
and function. In addition, in the
process of serving clients to which compatible systems had been sold, the
subject machines would be used for purposes of servicing those clients
CONCLUSIONS OF LAW
1.
Regulation R884-82S-1 provides for an exemption of "tangible personal
property purchased by wholesaler, retailer and held for display demonstration
or trial on regular course of his business.
2.
There is a tax levied upon the sale of tangible personal property within the
state. Utah Code Ann.59-12-103.
3.
Retail sale means any sale within the state of tangible personal property to a
user or a consumer. Utah Code Ann.
59-12-102(8a).
4.
"Use" does not include the sale, display, demonstration or trial of that
property in the regular course of business and held for resale. Utah Code Ann. 59-12-102(14b).
FINAL DECISION
After
reviewing the evidence and arguments, the Utah State Tax Commission finds that
the computer systems which are the subject of this appeal were purchased and
held for resale. The personal use by
the Petitioner amounted to a sufficiently small amount to be de minimums and,
therefore does not take the matter from an exempt to taxable status. The Commission finds sufficient proof that
the capitalization of the XXXXX was, in fact, in error and corrected, and finds
the argument of the Respondent that the asset was capitalized and therefore
should be taxed without merit. The
Petition of XXXXX is granted. The
Auditing Division is ordered to adjust its records to reflect this decision and
to make appropriate refunds where necessary.
DATED
this 23 day of March, 1989.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner
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