BEFORE THE UTAH STATE TAX COMMISSION
Petitioner : FINDINGS OF FACT,
: CONCLUSIONS OF LAW,
v. : AND FINAL DECISION
AUDITING DIVISION OF THE : Appeal No. 91-0933
UTAH STATE TAX COMMISSION : Account No. XXXXX
STATEMENT OF CASE
This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Alan Hennebold, Presiding Officer, heard the matter for and on behalf of the Commission. XXXXX, attorney, represented Petitioner. XXXXX, Assistant Utah Attorney General, represented Respondent.
Prior to the formal hearing, the parties submitted a stipulation of facts. After the hearing, the parties were permitted to augment the record with a supplemental stipulation, which was received by the Commission on XXXXX.
Based upon the parties' stipulations of fact, the Commission hereby makes its:
FINDINGS OF FACT
1. The tax in question is sales tax.
2. The period in question is XXXXX through XXXXX.
3. Respondent audited Petitioner for compliance with Utah's Sales Tax Act for the period in question. As a result of that audit, Respondent assessed Petitioner with additional sales tax of $$$$$ plus interest. In this appeal, Petitioner challenges only that portion of the additional tax arising from the sale of XXXXX tangible personal property.
4. Petitioner does business as a XXXXX, which consist mostly of XXXXX, XXXXX. The exact method of XXXXX is selected by Petitioner's clients and can include either XXXXX or XXXXX.
5. Petitioner is also the standing auctioneer for the XXXXX Utah. Trustees appointed by the Court may use Petitioner for liquidation of personal property of bankruptcy estates without obtaining prior permission of the Court.
6. In the bankruptcy of XXXXX, the Court-appointed Chapter 7 trustee was responsible for liquidating the assets of XXXXX. The trustee was informed by XXXXX that XXXXX was interested in purchasing all XXXXX tangible personal property.
7. The trustee contacted Petitioner to inventory and appraise XXXXX assets, located in XXXXX. Because of the volume of the items of personal property and particularly because of the XXXXX pounds of XXXXX, Petitioner recommended that the property should be sold in bulk to a purchaser with experience and qualifications to handle the XXXXX. Based upon this recommendation, the trustee and Petitioner negotiated with XXXXX for a bid for the purchase of all XXXXX tangible assets.
8. The sale of the property was not advertised by the Petitioner.
9. On XXXXX, XXXXX made an earnest money deposit of $$$$$ with Petitioner for the purchase of XXXXX tangible assets. On XXXXX Petitioner received the balance of the bid price from XXXXX.
10. XXXXX made all arrangements for the transportation and delivery of the XXXXX property to its location in XXXXX. The personal property was never in the physical possession of the Petitioner.
11. On XXXXX, Petitioner remitted to the trustee the proceeds from the XXXXX sale, less a 15% sales fee. No sales tax was collected from XXXXX on the XXXXX sale.
12. In addition to the assets sold to XXXXX, XXXXX assets included XXXXX which were sold to other companies. Petitioner had no involvement in the sale of the XXXXX.
13. In its capacity as standing auctioneer for the XXXXX, Petitioner is involved in the sale of all of the assets and properties of bankrupt entities to a single buyer approximately two (2) or three (3) times per year on average.
14. As a result of questions regarding the XXXXX asset sale, Petitioner requested an opinion from the Commission as to why sales of an entire business to a single buyer were not exempt from sales tax collection. By letter dated XXXXX, Commissioner XXXXX responded to Petitioner's request with an advisory opinion that the transaction was not an isolated or occasional sale and was not exempt from sales tax.
CONCLUSIONS OF LAW
Generally, taxing statutes are to be construed strictly, and in favor of the taxpayer where doubtful. [Pacific Intermountain v. State Tax Commission, 8 Utah 144, 146; 329 P.2d 650 (1958)]. However, statutes which provide for exemptions to general taxation provisions are also strictly construed, and the taxpayer has the burden of showing its entitlement to the exemption. [Parsons Asphalt Products v. Utah State Tax Commission, 617 P.2d 397, 398 (Utah 1980)].
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)].
Sales tax is not imposed on isolated or occasional sales by persons not regularly engaged in business. [Utah Code Ann. §59-12-104(14)].
Sales made by officers of a court, pursuant to court orders, are occasional sales, with the exception of sales made by trustees, receivers, assignees and the like, in connection with the liquidation or conduct of a regularly established place of business. Examples of casual sales are those made by sheriffs in foreclosure proceedings and sales of confiscated property. [Administrative RuleR865-19S-38(A) (emphasis added)].
Isolated or occasional sales made by persons not regularly engaged in business are not subject to the (sales) tax. The word "business" refers to an enterprise engaged in selling tangible personal property or taxable services notwithstanding the fact that the sales may be few or infrequent. Any sale of an entire business to a single buyer is an isolated or occasional sale and no tax applies. [Administrative RuleR865-19S-38(D)].
"Retailer" includes commission merchants, auctioneers, and any person regularly engaged in the business of selling to users or consumers within the state. [Utah Code Ann. §59-12-102(9)(b)].
Every auctioneer, consignee, bailee, factor, etc. entrusted with possession of any bill of lading, custom house permits, warehousemen's receipts, or other documents of title for delivery of any tangible personal property, or entrusted with possession of any of such personal property for the purpose of sale, is deemed to be the retailer thereof, and is required to collect sales tax, file a return, and remit the tax. The same rule applies to lien holders such as storage men, pawnbrokers, mechanics, and artisans. [Utah Admin. RuleR865-19S-45].
Each vendor shall pay or collect and remit the sales taxes imposed by Utah's Sales Tax Act if the vendor has or utilizes an office, distribution house, sales house, warehouse, service enterprise, or other place of business in Utah. Utah Code Ann. §59-12-107(1)(a)].
"Vendor" means, among other things, any person receiving any payment or consideration upon a sale of tangible personal property or any other taxable item or service under SubSection 59-12-103(1), or to whom such payment or consideration is payable. [Utah Code Ann. §59-12-102(17)(a)].
DECISION AND ORDER
Petitioner's appeal presents two issues. First, is the XXXXX sale exempt from sales tax as an "isolated or occasional sale by persons not regularly engaged in business"? Second, if the sale is subject to sales tax, is Petitioner liable for payment of that tax? Utah Code Ann. §59-12-103(1) sets forth the general rule that all sales of tangible personal property in Utah are subject to sales tax. Exceptions to the general rule must be construed narrowly. [Parsons Asphalt Products v. Utah State Tax Commission, 617 P.2d 397 (Utah 1980)].
Petitioner argues the XXXXX sale is exempt from sales tax, relying on Utah Code Ann. §59-12-104(14), which exempts from sales tax "isolated or occasional sales by persons not regularly engaged in business". However, Rule 865-19-38S governs the application of the "occasional sale" exemption. Subparagraph A of the Rule recognizes that in the course of bankruptcy proceedings, trustees take title to bankrupt estates and liquidate such assets on a regular and recurring basis.
The rule therefore provides that sales by trustees in connection with the liquidation of a business are not isolated or occasional sales.
The sale of XXXXX assets follows the pattern anticipated by Subparagraph
A. Upon filing of XXXXX Chapter 7 Bankruptcy Petition, title to XXXXX assets were vested in the bankruptcy trustee. The trustee then directed Petitioner to handle the sale of XXXXX tangible personal property to XXXXX for $$$$$. Because such sales are an ordinary and recurring aspect of the trustee's business, the sale was not an isolated or occasional sale within the meaning of §59-12-104(14).
Even if Petitioner were considered to be the "seller" of the XXXXX property, the result would be the same. Under RuleR865-19S-38(A), liquidation sales by "trustees, receivers, assignees and the like" (emphasis added) are not isolated or occasional sales.
Petitioner cites a series of cases decided by the Utah Supreme Court in its argument that the XXXXX sale is exempt from sales tax as an "isolated or occasional" sale. However, each cited case is distinguishable from the XXXXX transaction. In Geneva Steel Co. v. State Tax Commission, 23 Utah 2d 84; 209 P.2d 208 (1949), the property was sold by an agent of its owner, rather than by a bankruptcy trustee. Furthermore, the sale was of a going concern and not as a business liquidation. In Pacific Intermountain v. State Tax Commission, 8 Utah 2d 144; 329 P.2d 650 (1958), the Court was concerned with the definition of "motor vehicles", not occasional sales. In both L. A. Younq & Sons Construction Co. v. State Tax Commission, 457 P.2d 973 (Utah 1969) and Husky Oil Company v. State Tax Commission, 556 P.2d 1268 (Utah 1976), the property was sold by an agent of its owner, rather than by a bankruptcy trustee.
In summary, because the bankruptcy trustee was the seller, the XXXXX transaction is not an isolated or occasional sale within the meaning of Utah Code Ann. §59-12-104(14). The sale is therefore subject to tax under Utah Code Ann. §59-12-103(1).
The second issue is whether Petitioner is liable for payment of the sales tax,. (Utah Code Ann.59-12-107(1), requires that every vendor in Utah pay or collect and remit the sales and use taxes imposed by the Sales Tax Act on retail sales. "Vendor" is defined by Utah Code Ann. §59-12-102(17)(a) as "any person receiving payment . . . upon a sale of tangible personal property . . . or to whom such payment is payable . . . ." (emphasis added). As auctioneer, Petitioner received payment from XXXXX for XXXXX tangible personal property and is therefore both a "vendor" and a "retailer". Consequently, Petitioner must pay and remit the tax due on the XXXXX sale.
Based on the foregoing, the Commission concludes that Respondent properly assessed Petitioner for sales tax arising from the XXXXX sale. Petitioner's request for redetermination is denied and Respondent's audit determination is affirmed. It is so ordered.
DATED this 4TH day of May, 1992.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco S. Blaine Willes