BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________
XXXXX
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
Respondent :
__________________________________
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
Chairman Commissioner
Joe B.
Pacheco S.
Blaine Willes
Commissioner Commissioner