89-1030 - Sales & Use






Petitioner : FINDINGS OF FACT,






: Account No. XXXXX

Respondent :



This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Joseph G. Linford, Presiding Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner was XXXXX, Attorney at Law. Present and representing the Respondent were XXXXX, Assistant Attorney General, and XXXXX of 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:


1. The tax in question is sales and use tax.

2. The period in question is XXXXX through XXXXX.

3. Petitioner is a Utah corporation whose business includes XXXXX construction projects under contract with XXXXX.

4. This case involves two projects under contract with XXXXX, hereafter denoted as the "XXXXX" and the "XXXXX."

5. The bidding process for both projects was begun by a "Notice to Contractors" issued by XXXXX for each project. The notice for the XXXXX was dated XXXXX, and the notice for the XXXXX was dated XXXXX. These notices solicited sealed proposals or bids to perform the construction for each XXXXX, and allowed until XXXXX, for the submission of these bids along with a required "proposal guaranty" or "bid bond" equal to 5% of the amount of each bid. These guarantees could be forfeited to XXXXX if the contractor who is awarded the contract fails to execute the contract and send it to XXXXX with the required payment and performance bonds within ten days after the award of the contract. The notice for the XXXXX was later amended by XXXXX, extending the submission deadline to XXXXX.

6. On XXXXX, Petitioner submitted its bid for the XXXXX along with a $$$$$ proposal guaranty. On XXXXX, Petitioner submitted its bid for the XXXXX along with a $$$$$ proposal guaranty. When these bids were opened on the day of their submission, Petitioner's bids were announced as the successful low bids.

7. Written notices confirming the award of the contracts from XXXXX were issued on XXXXX, and XXXXX, for the XXXXX jobs, respectively. Payment and performance bonds were then made for each project respectively on XXXXX, and XXXXX.

8. The dates of the final written contracts were XXXXX, for the XXXXX, and XXXXX, for the XXXXX.


1. Utah Code Annotated 59-12-105(2) provides:

Any person subject to a tax imposed by this part who purchases tangible personal property pursuant to a binding, written contract with a definite amount, is entitled to a refund of the additional 1/2 of 1% tax imposed by the Legislature at the 1987 General Session, if the contract was executed prior to March 1, 1987, and if a person subject to the tax does not have a provision within the contract to collect the tax. The claim for refund must be accompanied by any information required by the Commission to show the contract was executed prior to March 1, 1987, and to prove the additional tax was paid. No claim for refund is allowed if submitted after April 1, 1990. Interest shall not be paid on any refund.

2. Utah Administrative Code R905-1-7(D), regarding the administration of contracts between XXXXX and individual contractors, provides that "no contract shall be considered effective until it has been fully executed by all of the parties thereto."

3. Utah Code Ann. 59-12-105(2) is a remedial statute, the legislative intent being to allow relief to taxpayers who are bound by the terms of a contract entered into before the increase in the sales tax rate went into effect (pursuant to Utah Code Ann. 59-12-103) on March 31, 1987. Taxpayers who, prior to the increase in the sales tax rate, enter into contracts to provide taxable tangible personal property in the performance of those contracts, but must acquire that taxable tangible personal property after the increase in the sales tax rate has been implemented, were permitted to claim a remedial refund of the additional tax paid since that additional tax was not included in the terms of the original contract.

4. Since the statute is remedial in nature it should be construed to accomplish the legislative purpose in curing the defect in the prior law. In this case, a binding contract was entered into when Petitioner's bids were formally accepted by XXXXX. Petitioner was legally bound to perform under the bids or be liable for liquidated damages in the amount of its proposal guarantees. There was a written, binding, commitment when the bids were accepted by XXXXX as the successful low bids, as evidenced by the written bids and the written acceptance of the bids. This situation falls within the provisions of 59-12-105(2).

5. The Tax Commission finds that the general statement of the law as contained in 72 C.J.S. Supp. Public Contracts 18 (1975) is appropriate in the determination of this case. That section states:

All the essential elements of a contract must be present in order to create a binding and enforceable public contract, and such a contract must be executed, with respect to formal requisites, in the manner, if any, provided by law, and contain such provisions as are required by statute or regulation.

Furthermore, the Utah Supreme Court has stated:

An ordinary advertisement for a bid is not itself an offer, rather the bid or the tender is an offer which creates no right until accepted. Particularly in the case of public contracts, the requirement of certain formalities by law, such as a written contract, indicates that even after acceptance of the bid, there is no contract until there has been compliance with the requisite formalities. Salt Lake, 527 P.2d 651, 654 (Utah 1974).

In this case, prior to XXXXX, the Petitioners were legally

required to either perform the contract at the bid price, without increasing the amount by the amount of increased sales tax, or to forfeit the proposal guarantees, which would have caused substantial irreparable financial harm and injury to the Petitioner. Although the contracts may not have been reduced

to a single document until after the deadline, there was, nevertheless, a fully enforceable obligation to perform with the terms spelled out in writing prior to the deadline date.


Based upon the foregoing, it is the decision and order of the Utah State Tax Commission that Petitioner's request for a refund under Utah Code Ann. 59-12-105(2) is granted. It is so ordered.

DATED this 26th day of October, 1990. BY ORDER OF THE UTAH STATE TAX COMMISSION.

R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco G. Blaine Davis Commissioner Commissioner