BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
:
Petitioner : FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
v. : AND FINAL DECISION
:
AUDITING
DIVISION OF THE : Appeal No. 89-1030
UTAH STATE TAX COMMISSION :
: Account
No. XXXXX
Respondent :
_____________________________________
STATEMENT OF CASE
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:
FINDINGS OF FACT
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.
CONCLUSIONS OF LAW
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.
DECISION AND ORDER
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