93‑0238

Sales & Use

Signed 8/16/94

BEFORE THE UTAH STATE TAX COMMISSION

_____________________________________

XXXXX

dba XXXXX

Petitioner, ) FINDINGS OF FACT,

) CONCLUSIONS OF LAW,

v. ) AND FINAL DECISION

)

AUDITING DIVISION OF THE ) Appeal No. 93‑0238

UTAH STATE TAX COMMISSION, )

) Account No. XXXXX

Respondent. ) Tax Type: Sales & Use

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Gail S. Reich, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was XXXXX. Present and representing Respondent was XXXXX.

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 to XXXXX for XXXXX and XXXXX to XXXXX for XXXXX.

3. The amount of tax in question is $$$$$.

4. Petitioner, as part of its service in XXXXX to the general public, furnishes insurance on the vehicles it leases and rents for those who do not have satisfactory insurance. In furnishing the insurance, the Petitioner charges its cost for the insurance coverage.

5. Petitioner does not have an insurance license to sell

insurance .

6. The insurance involved includes liability, comprehensive, and collision insurance structured to protect Petitioner from potential damage to its vehicles and to protect Petitioner from liability for the lessee's or renter's negligent act in relation to the use of the leased or rented vehicles.

7. Petitioner did not charge its customers sales tax on the liability, comprehensive, and collision insurance.

APPLICABLE LAW

Utah Code Ann. 59‑12‑103 provides, in pertinent part, that sales tax is levied "on the purchaser for the amount paid or charged for the following:...(k)lease and rentals of tangible personal property if the property site is in this state..."

ANALYSIS

Petitioner argues that the "collision damage waiver fee" it charges its customers is actually an insurance policy, and, under Utah Code Ann. 59‑12‑102(13)(b)(iii), insurance certificates or policies are not included under "tangible personal property."

This characterization however, contradicts the explanation on the Petitioner's rental agreement form which states that the collision damage waiver fee is not insurance. It also contradicts the notice provided Petitioner by its insurer, XXXXX, which states that "when you offer your custom a vehicle 'with insurance,' you are not soliciting or selling insurance. Only a duly licensed and appointed agent can solicit or sell insurance. Under the law, you cannot charge your customer for insurance coverage as a separate charge. You may, of course, establish lease or rental based rates that distinguishes between vehicles leased or rented with insurance coverage and those leased or rented without.

The evidence before the Commission supports the conclusion that the damage waiver fee increases the rental or lease rate to offset Petitioner's increased cost of carrying the necessary insurance. Petitioner is not selling insurance certificates or policies as contemplated by 59‑12‑102(13)(b)(iii).

Petitioner sights Utah Code Ann. 31‑A‑22‑312(4)(a)(b) to support its position. The Commission finds no application of this subparagraph to the issue at hand.

DECISION AND ORDER

Based upon the foregoing, the Tax Commission finds that sales tax was properly assessed on the collision damage waiver fee charged Petitioner's customers and hereby upholds the Auditing Division's assessment of sales tax on the collision damage waiver fees collected. It is so ordered.

DATED this 16 day of August, 1994.

BY ORDER OF THE UTAH STATE TAX COMMISSION

Val Oveson Roger O. Tew

Chairman Commissioner

Absent

Joe B. Pacheco Alice Shearer

Commissioner Commissioner

NOTICE: You have twenty (20) days after the date of a final order to file a Request for Reconsideration with the Commission. If you do not file a Request for Reconsideration with the Commission, you have thirty (30) days after the date of a final order to file a.) a Petition for Judicial Review in the Supreme Court, or b.) a Petition for Judicial Review by trial de novo in district court. (Utah Administrative Rule R861‑1‑5A(P) and Utah Code Ann. ''59‑1-601(1), 63‑46b‑13(1), 63‑46‑14(3)(a).)

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