BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________
XXXXX )
:
Petitioner, ) FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
v. ) AND FINAL DECISION
:
COLLECTION
DIVISION OF THE ) Appeal No. 92-1508
UTAH STATE TAX
COMMISSION, :
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 on behalf of the Commission. XXXXX, Vice President of XXXXX Construction,
represented Petitioner. XXXXX,
Assistant Utah Attorney General, represented Respondent.
Based
upon the evidence 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 October XXXXX
through December XXXXX.
3. Petitioner is a Utah corporation located in
XXXXX, Utah. Its business consists
primarily of construction work for various XXXXX agencies.
4. On XXXXX, Respondent assessed Petitioner
with additional use tax of $$$$$, penalties totaling $$$$$, and interest
accrued through XXXXX. Petitioner filed
a timely appeal of the foregoing assessment with the Tax Commission.
5. On XXXXX, Respondent issued an amended
audit. The amended audit did not reduce
the amount of tax assessed against Petitioner, but corrected the computation of
penalties, thereby reducing such penalties to $$$$$.
6. Petitioner does not contest the entire
amount of the audit assessment, but only the assessment arising from its
dealings with a materials vendor, XXXXX, and a subcontractor, XXXXX.
7. Petitioner's transaction with XXXXX occurred
in connection with Petitioner's contract with XXXXX ("XXXXX"
hereafter) to replace windows in base housing.
During contract negotiations between Petitioner and XXXXX, Petitioner
included in its proposal the cost of windows to be supplied by XXXXX, including
the applicable Utah sales tax. XXXXX
awarded the contract to Petitioner.
8. The plant at which XXXXX manufactured the
windows in question is located in XXXXX.
XXXXX also maintains distribution facilities in Utah and is required to
collect sales tax on its Utah sales.
9. In anticipation of supplying Petitioner with
the windows necessary for the XXXXX contract, XXXXX submitted its contract
documents to Petitioner. Included was a Utah sales tax exemption
certificate. Petitioner executed the
exemption certificate by indicating it was purchasing the windows for a
government agency, but also marked a box on the exemption certificate that
instructed XXXXX to add sales tax to Petitioner's invoices.
10. Petitioner took delivery of the windows in
question, and was billed by XXXXX for their purchase price. Not all the XXXXX invoices were submitted as
evidence in this matter. Of those that
were submitted, nineteen made no reference to sales tax. Two invoices included charges for Utah sales
tax. One invoice contained the notation
"No tax charged, tax number on file", apparently referring to the tax
exemption certificate Petitioner had filed with XXXXX. Petitioner concedes that it was not charged
sales tax on the bulk of its XXXXX invoices, and that it has not paid sales or
use tax with respect to the windows which are the subject matter of those
invoices.
11. After Petitioner completed performance of
its contract, it received payment from XXXXX as specified in the contract. Included was payment for the XXXXX windows
as well as sales tax on those windows.
12. After completion of the XXXXX contract,
Petitioner was audited by the XXXXX ("XXXXX"). XXXXX was advised by Petitioner that it
realized it had not been charged sales tax by XXXXX on the purchase of the
windows in question. Petitioner further
advised XXXXX that it would pay the sales tax when requested to do so by the
State of Utah.
13. Petitioner hired XXXXX as a subcontractor to
provide materials and labor necessary to repair windows which Petitioner had
broken during the installation process, primarily at the XXXXX contract
site. Petitioner did not pay sales or
use tax on the materials used by Mr. XXXXX in the performance of his
subcontracting work.
14. In addition to the foregoing, on one
occasion XXXXX was employed to replace a window in Petitioner's backhoe.
CONCLUSIONS OF LAW
Utah's
Sales and Use Tax Act levies a tax on the purchaser for the amount paid for
retail sales of tangible personal property made within the state. (Utah Code Ann. §59-12-103(1).)
The
Commission's RuleR865-19S-58 provides, in material part, that sales of tangible
personal property to real property contractors and repairmen of real property
are generally subject to tax. The
person who converts the personal property into real property is the consumer of
the personal property since he is the last one to own it as personal property.
Utah
Code Ann. §59-1-401 provides the following penalties with respect to nonpayment
or underpayment of taxes: a 10% penalty if the underpayment is due to
negligence; a 15% penalty if the underpayment is due to intentional disregard
of law or rule; a penalty of the larger of $$$$$ or 50% if the underpayment is
due to intent to evade the tax; and, a penalty of the greater of $$$$$ or 100%
of the tax due if the underpayment is due to fraud with intent to evade the
tax.
For
reasonable cause, the Commission may waive, reduce, or compromise any penalties
or interest. (Utah Code Ann. §59-1401(8).)
Utah
Code Ann. §59-12-106 provides, in material part, as follows:
. . . (I)t shall be presumed that tangible
personal property . . . sold by any person for delivery in this state is sold
for storage, use, or other consumption in this state unless the person selling
such property . . . has taken from the purchaser an exemption certificate
signed by and bearing the name and address of the purchaser to the effect that
the property . . . was exempted under Section 59-12-104 . . . .
Utah
Code Ann. §59-12-107 provides, in material part, as follows:
(l)(a)
Each vendor shall pay or collect and remit the sales and use taxes imposed by
this chapter . . . .
(2)(C)(i)(A)
Each vendor shall give the purchaser a receipt for the use tax collected. . . .
(2)(C)(ii)
The receipt or invoice is prima facie evidence that the vendor has collected
the use tax and relieves the purchaser of the liability for reporting the use
tax to the state as a consumer. . . .
DECISION AND ORDER
Petitioner
concedes that its purchases of windows from XXXXX were subject to Utah sales
tax. It argues, however, that it was
XXXXX's duty to collect the tax and that because XXXXX failed to do so, the
liability for such tax now rests with XXXXX, and not Petitioner.
Utah's
Sales and Use Tax Act and the accompanying rules of the Tax Commission make
clear that sales and use tax is levied on the purchaser for the amount paid for
taxable goods or services. While it is
true that the Act also imposes a duty on the vendor to collect the tax, the
duty to pay the tax remains with the purchaser unless the vendor provides the
purchaser with a receipt or invoice showing that the tax has been paid. Such a receipt or invoice is prima facie
evidence that the tax has in fact been paid by the vendor to the state, and
shifts the burden of payment from the purchaser to the vendor. (See Utah Code Ann. §59-12-107.)
In
this case, Petitioner knew that its purchases of materials from XXXXX were
subject to Utah sales tax. XXXXX's invoices
showed that in almost all cases, no tax had been charged. Payment of the tax therefore remained
Petitioner's responsibility. Petitioner
acknowledged as much during its XXXXX audit.
The Commission therefore affirms Respondent's assessment of sales tax
against Petitioner arising from the XXXXX transactions.
With
respect to the assessment of sales tax in connection with Petitioner's payments
to XXXXX for repairs to windows that had been installed to real property, the
Commission refers to its RuleR865-19S-57.
That rule provides that the contractor or repairman who installs
personal property to real property is the consumer of such personal property
and is therefore subject to pay sales tax on his purchase of the
materials. That being the case, XXXXX,
not Petitioner, was the consumer of the materials in question and subject to
the tax thereon.
The
final issue to be resolved in this matter is the propriety of Respondent's
assessment of a 50% penalty against Petitioner on the grounds Petitioner failed
to pay its sales tax liability in the XXXXX matter with the intent to evade
such tax. Based upon the record in this
matter, the Commission concludes that Petitioner knew the XXXXX transactions
were taxable. However, Petitioner's
conduct does not appear to have been motivated by an intent to evade the tax so
much as an intentional disregard for the applicable statutes and rules. Pursuant to Utah Code Ann. §59-1401, the Commission therefore reduces
the penalty from 50% to 15%.
In
summary, the Commission affirms Respondent's assessment of sales tax against
Petitioner in connection with the XXXXX transactions. The Commission finds that Petitioner has no liability for sales
tax arising from the XXXXX transactions.
Finally, the penalty assessed against Petitioner is reduced from 50% to
15%. Respondent is instructed to
recompute Petitioner's liability for sales tax, penalty and interest in
accordance with this decision, and advise Petitioner of the same. It is so ordered.
DATED
this 7th day of May, 1993.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco S.
Blaine Willes
Commissioner Commissioner