BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
:
Petitioner, : FINDINGS OF FACT,
v. : CONCLUSIONS OF LAW
: AND FINAL
DECISION
AUDITING
DIVISION OF THE :
UTAH STATE TAX COMMISSION, : Appeal
No. 88-1254
:
Respondent. :
_____________________________________
This
matter came before the Utah State Tax Commission pursuant to Rules of
Administrative Procedure and Administrative Procedures Act for formal
adjudicative proceedings. XXXXX
appeared representing the Petitioner. Also appearing for the Petitioner was
XXXXX. XXXXX appeared representing the
Respondent. Also appearing for the
Respondent was XXXXX. James E. Harward, Presiding Officer, heard the matter for
and in behalf of the Tax Commission.
Based
upon the evidence and arguments presented at the hearing, the Tax Commission
makes its:
FINDINGS OF FACT
1. The Tax in question is sales tax.
2. The period in question is XXXXX through
XXXXX.
3. The Petitioner is a Utah Corporation with
its principal place of business in XXXXX, Utah.
4. The Petitioner is involved in three phases
of operation. Those phases are: XXXXX,
XXXXX, and XXXXX.
5. In its wholesale operation, the Petitioner
would sell materials to XXXXX as a package basis. As part of the sale, Petitioner would deliver the materials to an
out of state site designated by the purchaser. The question before the Tax
Commission is whether or not delivery out of state was a delivery and an
integral part of the transaction.
6. As a XXXXX, the Petitioner is licensed and
bonded to XXXXX. Some of the construction
is XXXXX, done on its site in XXXXX.
Other job sites are XXXXX on site.
7. Petitioners sell wholesale to other XXXXX
and retailers who then re-sell the merchandise.
8. The documentation submitted by the
Petitioner was incomplete at best and showed deliveries both in and out of the
State of Utah and picked up by the purchaser within the State of Utah without
address or destination.
9. The Petitioner presented testimony in lieu
of exemption certificates in an attempt to satisfy the requirements of Rule 23S
to establish that individuals who had not provided valid exemption certificates
were entitled to an exemption because they were purchasing for resale.
10. No sales tax was charged to XXXXX regardless
of delivery, will call, or destination.
11.
Petitioner had no general ledgers in
existence at the time of the audit. Job
cost figures were very sketchy. The
auditors had to fill in gaps as best as they could from little if any
information supplied by the Petitioner.
12. In their XXXXX operation, the Petitioners
had no cost records. They would remove
materials from the general inventory at the retail/wholesale outlet and use in
their XXXXX operations. The inventory did
not have a job designation.
13. Petitioner did not maintain separate books
for the three operations.
Petitioners
did collect and pay sales tax on their Utah retail XXXXX operation.
CONCLUSIONS OF LAW
1. Tax Commission Rule R865-44S-l exempts sales
made in interstate commerce from sales tax.
However, that exemption is qualified where the transaction must involve
actual physical movement of the property sold across state lines. Such movement must be an essential and not
an incidental part of the sale and the seller must be obligated by the express
or unavoidable implied
terms of the sale or the contract to sell to
make physical delivery of the property across the state boundary lines to the
buyer.
2. "Taxpayer selling tangible personal
property or services to exempt customers are required to keep records verifying
the nontaxable status of such sales." Rule R865-23S-l.
3. "Sales of tangible personal property to
real XXXXX. . . . is generally subject to tax." Tax Commission Rule R865-58S-lA.
The person who converts the personal property into real property is the
consumer of the personal property since he is the last one to own this personal
property. (Rule 58S, Supra.)
4. "The XXXXX must accrue and report tax
on all merchandise bought tax free and used in performing contracts to improve
and repair real property. Books and records
must be kept to account for both materials sold and material
consumed." Rule R865-58S-l-B-2.
5. "Sales of materials and supplies to
XXXXX for use in out-of-state jobs are taxable unless sold in interstate
commerce in accordance with Rule R865-44S." (58S Supra).
DECISION AND ORDER
The
Tax Commission, after reviewing the evidence and arguments of the Petitioner,
finds that the Petitioner has not met the requirement of selling materials in
interstate commerce according to Rule 44S.
Specifically the Tax Commission finds that Petitioner has not maintained
sufficient records to indicate the matter was, in fact, shipped out of state
and was an integral part of the sale.
The records and testimony of the Petitioner would indicate that in a
vast majority of the cases cited by the Petitioner "WC" was written
on the form which indicates to the Commission that the XXXXX picked up the
materials in Utah. The Tax Commission
further finds that where valid exemption certificates are not kept and
maintained as part of the records by Petitioner that self serving testimony is
not sufficient to correct the failure to properly keep the appropriate records
and support and justify the non-collection of the tax.
Therefore,
it is the Decision and Order of the Utah State Tax Commission that Petitioner's
request be denied and sales tax is due on all transaction whereby the
Petitioner was the real XXXXX and converted the personal property into real
property. No consideration is given by
the Tax Commission of the use of the materials out of state where the XXXXX is
a licensed contractor in the State of Utah and purchased the materials in the
State of Utah. Further, insufficient
evidence has been submitted which would support the contention that the
materials were delivered out of state as part of the sale. Attempting to insert testimony as it relates
to exempt sales is insufficient to correct the deficiency of not maintaining
appropriate books and records and maintaining exemption certificates on the
transactions involved. The Tax
Commission affirms the negligence penalty that relates to this transaction.
DATED
this 26 day of April, 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