BEFORE THE UTAH STATE TAX COMMISSION
Petitioner, : FINDINGS OF FACT,
: CONCLUSIONS OF LAW
v. : AND FINAL DECISION
AUDITING DIVISION OF THE :
STATE TAX COMMISSION OF UTAH, ) Appeal No. 87-1270
STATEMENT OF CASE
This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Paul F. Iwasaki, Presiding Officer, heard the matter for and in behalf of the Tax Commission. Present and representing the Petitioner was XXXXX. Present and representing the Respondent were XXXXX both with the Auditing Division of the Utah State Tax Commission. Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:
FINDINGS OF FACT
1. The tax in question is sales tax.
2. The audit period is XXXXX.
3. The Petitioner is a manufacturer of cultured marble and onyx products.
4. The Petitioner would buy raw materials and then turn it into a finished product. The Petitioner did not pay sales tax on the raw materials which included resin and fillers.
5. Some of the finished products the Petitioner sold were sales made on a retail level to "walk-in" customers. The Petitioner collected sales tax on those sales.
6. The majority of sales made by the Petitioner were sales made to those whom the Petitioner described as "prime contractors." By that term, the Petitioner referred to general contractors who were responsible for the project in which the products were being used.
7. Of the sales made to the "prime contractors", the Petitioner would charge sales tax if the contractors purchased the products and installed them themselves. If the Petitioner installed the product for the contractor, he was, in his opinion, acting as a subcontractor and would not charge sales tax.
8. The Petitioner did not keep any accounting records during that period of time. The audit was based on sales and purchase invoices.
9. The Petitioner was given credit for all sales in which exemption certificates were provided as well as for out of state sales.
10. A sales tax deficiency was assessed for all sales made by the Petitioner where sales tax was not paid and no exemption certificates were obtained or other exemptions applied.
11. 80% of the sales price of the products sold by the Petitioner reflected cost for materials. The remaining 20% reflected labor cost.
CONCLUSIONS OF LAW
Retail sales of tangible personal property made within the state are subject to sales tax. (Utah Code Ann.59-12-103) Sale of tangible personal property to real property contractors in repair of real property is generally subject to tax. (Utah State Tax Commission Administrative RuleR865-19S-58).
DECISION AND ORDER
In the present case, the vast majority of the sales made by the Petitioner were to what the Petitioner described as "prime contractors." In those circumstances where the contractors simply purchased the product and installed them themselves, the Petitioner charged sales tax. Petitioner's actions in those circumstances were quite appropriate. It is the situation where the Petitioner installed the product for the contractor and himself acted as a subcontractor that created problems. In those instances, the Petitioner would sell and install the product for the general contractor and would not charge sales tax to the general contractor. In order to properly do so, the Petitioner must have paid sales tax on the materials used in making the product. That he did not do. During the course of hearing, the Petitioner seemed to imply that he was not given proper credit for those sales which were made to tax exempt entities and for which exemption certificates were obtained. There was no showing however, beyond the Petitioner's bare allegations, that the audit was not properly conducted and that proper credit for all sales tax paid and for those sales which were legitimately tax exempt were given. Based upon the foregoing, the Tax Commission affirms the deficiency as assessed by the Auditing Division for the audit period. It is so ordered.
DATED this 21 day of March, 1990.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis