BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
Petitioner, : INFORMAL DECISION
v. : Appeal No. 87-3247
AUDITING
DIVISION OF THE, : Audits Period XXXXX
STATE OF UTAH :
Respondent. :
_____________________________________
This
matter came before the Utah State Commission for an Informal Hearing on
XXXXX. James E. Harward, Hearing
Officer, heard the matter for and in behalf of the Tax Commission. XXXXX appeared representing the Respondent
XXXXX appeared representing the Petitioner.
At
the outset of the hearing the Petitioner indicated that he would concede the
issue on the soda pop. However, from
that point he raised three general issues as it relates to sales tax on those
sales designated as; 1) U.S. homes, 2) over the counter sales, and 3) sales to
employees.
DECISION AND ORDER
The
Tax Commission will review the three issues raised by the Petitioner separately
and in the order brought forth by the Petitioner. However, prior to doing so the Commission must note several
facts:
1.
The Petitioner is in the business of insulation, refitting and repair of
residential heating and air conditioning systems.
2.
It has been the Petitioners practice to pay sales tax on all materials and
supplies purchased by the company in conjunction with the ordinary course of
its operations.
3.
The Petitioner is entitled to a credit equal to the sales tax previously paid
on the purchase of goods and materials against sales tax that it is required to
collect on the sales of such goods and materials and taxable transactions for
sales tax purposes.
XXXXX
is a prefabricated housing manufacturer.
The Petitioner would come to the construction lot of XXXXX and install
in the modular units, heating and air conditioning systems. All of the work performed by the Petitioner
was done at XXXXX plant while the homes under construction remained fully
transportable and detached from real property.
In addition, XXXXX provided the Petitioner with a sales tax exemption
number and informed them that the XXXXX was collecting sales tax upon the sale
of the home to the retail purchaser.
Based on these facts and representations, the Petitioner did not collect
sales tax on contracts performed for XXXXX.
DECISION AND ORDER
Based
upon the evidence and arguments presented at the hearing, the Tax Commission
concludes that the Petitioner is not a real property contractor in its
relationship with XXXXX. Specifically
the Tax Commission is persuaded that the exemption certificate given by XXXXX
would leave the Petitioner to believe that it was not required to collect sales
tax in this transaction.
Credit
for taxes paid on goods which were ultimately resold. In computing the credit to be given for sales tax for goods which
previously have been paid upon the purchase of goods and materials against
sales tax which was collected upon those sales, the Respondent has used an
average markup of 65%. However, the Petitioner argues that their average markup
is only 25%, thus the Respondent has an understated credit which should be
given to the Petitioner. The Utah State Tax Commission finds this to be a
factual determination and finds no other evidence to indicate any other average
markup other than that put forth by the Petitioner of 25%. Therefore, the Auditing Division is ordered
to adjust its audit to reflect a 25% markup as it relates to credits against
taxable transactions of the Petitioner.
Projection
period: The Petitioner points to several factors which skew the test period in
favor of the Respondent.
The
Petitioner argues that because of the cyclical market the test skews results by
using test periods which have higher than average sales. Therefore, the income
is overstated and expenses are understated.
However,
the Petitioner did not present any other alternatives short of having the Tax
Commission order a complete detail by detail audit of the period in
question. This the Tax Commission
declines to do. It is therefore the
conclusion of the Utah State Tax Commission that insufficient evidence has been
presented which would justify an adjustment to the audit based upon the
contention of the Petitioner as it relates to the test periods.
Bad
debt adjustments. The Petitioner requested
an adjustment for bad debts of approximately $$$$$. The Tax Commission after reviewing this, finds the Petitioner may
file a TC55 to request credit for bad debts on the periods in question. It may also be appropriate to file a TC71
and receive a refund as it relates to bad debts. This option is certainly available to the Petitioner.
Based
upon the foregoing, it is the decision and order of the Tax Commission that the
request as it relates to XXXXX be granted, that the average market used is 25%,
that the argument as it relates to test periods and projections be denied and
that refunds may be granted or adjustments given for bad debts. It is so ordered.
DATED
this 31 day of March, 1989.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner