87-3151 - Sales




            Petitioner,                                                         :

v.                                                                                 :           INFORMAL DECISION

AUDITING DIVISION OF THE                                :           Appeal No. 87-3151

            UTAH STATE TAX COMMISSION,            :

            Respondent.                                                     :



            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 appeared representing the Petitioner.  XXXXX appeared representing the Respondent.

            Petitioner's part of its sales program presents to purchasers of automobiles a personalized calendar which contains the purchaser's picture with the automobile purchased.  The calendar with its picture is only available to those persons who purchase an automobile through the Petitioner.  Petitioner argues that the gift of the personalized calendar falls within Tax Commission Rule R865-6A-1b that provides, when a "retailer making a retail sale of tangible personal property which is subject to tax gives a premium together with the tangible personal property sold, the transaction is regarded as a sale of both articles to the purchaser, provided the delivery of such premium is certain and does not depend upon chance."

            Respondent, on the other hand, argues that the calendar is nothing more than a promotional tool which is used and consumed by Petitioner. Therefore, the Petitioner is required to pay sales tax upon the purchase of that personal property.  Further, the Petitioner argues that if it were a premium it would be required to be included on the purchase agreement and be included as part of the selling price.  The Respondent presented evidence which would indicate that in the sale of an automobile the gift of the calendar is not included in the sales price or in the purchase documents and, therefore, it does not qualify under their interpretation as a premium.


            The Tax Commission, after reviewing Rule R865-6A-1 finds that when a gift is given the tax is paid by the consumer of the item of personal property. That consumer would be the person giving the gift.  Sub paragraph (b) of Rule 68S allows an exception to that general rule.  When a gift is given in conjunction with a retail sale and does not depend upon chance, then the retail sale is considered the sale of both the personal property and the gift, and sales tax is charged on that transaction.  The purchase of the gift is not subject to tax in this exception.

                        The salient factors of whether or not a gift of personal property fits within sub paragraph (b) are: 1) is it given with the retail sale of personal property, 2) is the premium actually given to the purchaser, and 3) does the receipt or gift of the premium depend on chance?

            The facts before the Commission indicate that the gift of the calendar to the purchasers of automobiles is made in conjunction with an actual retail sale.  There is no evidence which would indicate that the calendar is given to anyone who does not purchase personal property.  In addition, the calendar is, in fact, given to those purchasers.  Finally, the gift of the calendar does not depend upon chance.  Everyone who purchases a car receives the calendar.

            Therefore, based upon this analysis the Tax Commission finds that the transactions involving the calendars with the Petitioner are purchased tax exempt by the Petitioner and is considered part of the retail sale of the automobile.  Therefore, Petitioner's request is granted and the Auditing Division is ordered to adjust its records to conform with this decision.

            DATED this 29 day of September, 1988.


R. H. Hansen                                                                Roger O. Tew

Chairman                                                                      Commissioner

Joe B. Pacheco                                                            G. Blaine Davis

Commissioner   Commissioner