96-0551
Sales
Signed 1/30/97
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
COMPANY A
:
:
Petitioner, : ORDER
:
v. :
:
AUDITING
DIVISION OF THE : Appeal No. 96-0551
UTAH STATE TAX COMMISSION, :
: Serial No.
#####
:
Respondent. : Tax Type: Sales
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for an Initial Hearing
pursuant to the provisions of Utah Code Annotated §59-1-502.5, on December 12,
1996. Alice Shearer, Commissioner,
heard the matter for and on behalf of the Commission. Present and representing Petitioner were PETITIONERS REP.,
Controller, and PETITIONERS REP., a tax representative. Present and representing Respondent were XXXXX,
Assistant Attorney General, together with XXXXX, Senior Auditor, and XXXXX,
Deputy Director of the Auditing Division.
This
appeal was filed March 21, 1996, in response to an amended Utah Sales and Use
Tax Audit Summary issued February 22, 1996, covering the audit period April 1,
1992 through March 31, 1995. Both
parties filed prehearing memoranda. Six
issues remain unsolved.
1. The Auditing Division charged Petitioner use
tax on labor charges to repair a large, four-color press. The Auditing Division claims the press is
tangible personal property and under Utah Code Annotated §59-12-103(1)(i)
charges for repairs are subject to tax.
Petitioner
relies upon Tax Bulletin 8-89 which advises that machinery attached to real
property for “proper operation” shall be treated as real property for the
purpose of computing tax on repairs.
The
Auditing Division stated they audited the accrual of use tax, the collection of
sales tax and the remittance of all sales and use tax in this audit. Petitioner pointed out that the repairs to
the press were handled by a local company that did not charge sales tax.
The
Auditing Division agreed that under their interpretation, the repairman should
have charged the tax or received an exemption certificate. The Auditing Division will check with them
to see why they are not billing and collecting sales tax.
The
Auditing Division will amend this audit to remove this assessment of use tax.
2. Petitioner submitted the copy of a check
dated April 25, 1994, that was payment for custom software. Respondent had assumed the purchase was for
non-custom software and charged “use” tax on the purchase. Respondent will amend the audit to remove
this item from purchases subject to use tax.
3. Pre-press material was not taxed appropriately. Petitioner removed the statement that had
been preprinted on its invoices that stated that title to pre-press materials
passed to the customer unless specifically exempted. Because of this change on their invoices, Respondent applied tax
to the whole transaction. Petitioner
thought the requirement about the preprinted notice on the invoice was “picky”
as they had been collecting accurately.
Respondent noted that this issue had been part of a previous audit so
the company knew what they should do.
The
Commission affirms the position of Respondent on this issue.
4. Petitioner purchased a four-color press to
replace and upgrade the printing process.
The old press was traded in for this new one. The new one is more productive and does better and faster
printing. Petitioner is relying on the
Newspaper Agency decision from the Court of Appeals to justify taking the
manufacturer’s exemption from sales tax on this equipment. Respondent states the purchase was
replacement equipment and as such is not entitled to the exemption, as per the
recent Supreme Court decision in Eaton-Kenway vs. Auditing Division, Utah
State Tax Commission, 906P.2d882 (Utah 1995). The Commission agrees that Eaton-Kenway controls the most
current case from the highest Utah court.
Petitioner must pay the sales tax on the purchase of the press.
5. In the audit, Respondent charged Petitioner
is liable for sales tax on a sale Petitioner claims was a sale for resale. Respondent does not dispute that it may be a
sale for resale but assessed the tax because Petitioner has no exemption
certificate or other evidence that the sale is exempt. Substitute evidence is acceptable (as the
Commission has said in the case of government entities), however, there is no
evidence at all in this case and that is unacceptable. Petitioner is liable for the tax.
6. Respondent has explained to Petitioner that
the 10% penalty related to the exemption taken on the purchase of the press is
not imposed for non-payment of the tax or, for late payment but for
non-reporting as required on line 10 of the sales tax form. Petitioner now understands and agreed to pay
the penalty.
DECISION AND ORDER
The
Commission has considered the documents in the file of this case and discussed
the arguments presented at the Initial Hearing. The decisions noted on the issues presented will be final unless
appealed to Formal Hearing.
This
decision does not limit a party’s right to a Formal Hearing. However, this Decision and Order will become
final unless any party to this case files a written request within thirty (30)
days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the
address listed below and must include the Petitioner’s name, address, and
appeal number:
Utah State Tax Commission
Appeals Division
210 North 1950 West
Salt Lake City, UT 84134
Failure
to request a Formal Hearing will preclude any further administrative action or
appeal rights in this matter.
DATED
this 30th day of January, 1997.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val
Oveson Richard
B. McKeown
Chairman Commissioner
Joe B.
Pacheco Alice
Shearer
Commissioner Commissioner
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