BEFORE THE UTAH STATE TAX COMMISSION
Petitioner, : FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
v. : AND FINAL DECISION
AUDITING DIVISION OF THE : Appeal No. 91-0698
UTAH STATE TAX COMMISSION, :
: Account NO. XXXXX
STATEMENT OF CASE
This appeal came before the Utah State Tax Commission for formal hearing on XXXXX. Alan Hennebold, Administrative Law Judge, heard the matter on behalf of the Commission. XXXXX appeared on his own behalf. XXXXX, Assistant Utah Attorney General, represented the Auditing Division.
On XXXXX, the Administrative Law Judge reopened the proceedings to allow the parties to submit additional evidence.
Based upon the evidence now before the Commission, the Commission hereby makes its:
FINDINGS OF FACT
1. The tax in question is sales tax.
2. The period in question is XXXXX.
3. Prior to XXXXX, XXXXX owned a XXXXX. XXXXX permitted XXXXX to use the aircraft from time to time.
4. On about XXXXX, XXXXX and XXXXX agreed to purchase the aircraft from XXXXX. At that time, XXXXX paid XXXXX his portion of the purchase price.
5. XXXXX applied XXXXX payment to a loan at XXXXX, which loan was secured by the aircraft. At the same time, XXXXX executed a Bill of Sale transferring the aircraft to XXXXX and XXXXX. XXXXX left the Bill of Sale with his bank, believing that the bank would not file the Bill of Sale until XXXXX had received payment from XXXXX. Instead, the bank recorded the Bill of Sale during XXXXX.
6. XXXXX was ultimately unable to raise the money to pay his share of the aircraft's purchase price.
7. When XXXXX and XXXXX learned that XXXXX was unable to perform his part of the purchase agreement, the entire transaction was cancelled. XXXXX returned XXXXX money to him. XXXXX transferred record ownership of the airplane back to XXXXX in XXXXX.
8. During the time that the aircraft sale agreement remained executory, XXXXX retained possession of the aircraft. During that time, XXXXX was allowed to use the aircraft on the same terms as before he agreed to purchase it.
9. The Auditing Division learned of XXXXX agreement to purchase the airplane and sent him a questionnaire to obtain more information. XXXXX completed and returned the questionnaire during XXXXX, reporting thereon that he had purchased the aircraft for $$$$$. Based upon that information, the Auditing Division assessed sales tax and interest against XXXXX. No penalty was assessed.
CONCLUSIONS OF LAW
Sales tax is levied on the purchaser for the amount paid or charged for retail sales of tangible personal property made within the state. (Utah Code Ann. §59-12-103(1)(a).)
Ordinarily, the time and place of a sale are determined by the contract of sale between the seller and buyer. The intent of the parties is the governing factor in determining both time and place of the sale subject to the general law of contracts. If the contract of sale requires the seller to deliver or ship goods to a buyer, title to the property passes upon delivery to the place agreed upon unless the contract of sale provides otherwise. (Utah Administrative Code, RuleR865-19S-31.)
Credit against sales tax liability may be allowed for the amount of tax attributable to returned goods and repossessions. (Utah Administrative Code, RuleR865-19S-20.)
DECISION AND ORDER
The question presented in this appeal is not whether the sale of an aircraft is subject to Utah's sales tax. Such a sale clearly is subject to tax. Instead, the issue presented by this appeal is whether a sale took place at all.
The time and place of a sale are determined by general contract law, which in turn looks to the intent of the parties. (See RuleR865-19S-31.) XXXXX has established that for a number of years, he had used the airplane in question by permission of its owner, XXXXX. During XXXXX, XXXXX and another individual agreed to jointly purchase the airplane. XXXXX paid his share of the purchase price to XXXXX, but his partner was unable to pay his share. As a result, the sale was cancelled and XXXXX refunded XXXXX payment.
Both XXXXX Bill of Sale and XXXXX answers to the Auditing Division's questionnaire anticipated that the sale could be completed as agreed. Due to unforseen events, the sale was cancelled and neither the Bill of Sale nor the questionnaire accurately described what took place.
The foregoing circumstances are analagous to the situation that exists when goods are purchased, then returned. The Commission's rules recognize that a sales tax credit may be allowed in such circumstances.
In light of the foregoing, the Commission concludes that no sale of the subject airplane was completed and that no sales tax is due. The Commission therefore abates all tax, penalty and interest assessed against XXXXX in this matter. It is so ordered.
DATED this 17 day of December, 1992.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val Oveson Roger O. Tew
Joe B. Pacheco Alice Shearer*