87-1269 - Sales





            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


            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


            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).


            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.


R. H. Hansen                                                                Roger O. Tew

Chairman                                                                      Commissioner

Joe B. Pacheco                                                            G. Blaine Davis

Commissioner                                                               Commissioner