97-0341
SALES
Signed 3/24/98
BEFORE THE UTAH STATE TAX COMMISSION
____________________________________
PETITIONER, )
:
Petitioner, ) DECISION
:
v. )
:
AUDITING DIVISION OF THE ) Appeal
No. 97-0341
UTAH STATE TAX
COMMISSION, :
) Account No. #####
:
Respondent. ) Tax
Type: Sales Tax
_____________________________________
STATEMENT OF CASE
This matter came before
the Utah State Tax Commission pursuant to the provisions of Utah Code Ann. '59-1-502.5 An Initial Hearing was held on March 3,
1998. Jane Phan, Administrative Law
Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner was
NAME, and former President of PETITIONER.
Present and representing Respondent was Clark Snelson, Assistant
Attorney General.
Based upon the evidence
in the file and presented at the hearing, the Commission makes its:
FINDINGS
Petitioner is appealing
additional sales tax and interest assessed by Respondent for the audit period
of July 1, 1993 through November 30, 1995.
An Amended Utah Sales and Use Tax Audit was issued on March 3, 1997. Pursuant to the amended audit Respondent
assessed an additional $$$$$ in tax along with the interest which had accrued
thereon. Of this amount $$$$$ was
uncontested by Petitioner. The
remainder, $$$$$, was contested by Petitioner and was the subject of this
appeal. No penalty had been assessed
against Petitioner.
Petitioner was in the
business of leasing, with rent-to-own provisions, various items of personal
property including furniture and appliances.
The contested amount of additional tax was assessed on funds Petitioner
collected from its rental customers for what it termed to be "Golden
Rental Contract" provisions. These
provisions were for: 1)extended warranty; 2)to provide payment in the event of
loss of income; and 3) a theft or casualty loss waiver. Based on advice from an accountant
Petitioner had not collected sales tax on the amount it charged its customers
for these Golden Rental Contract provisions.
It was Petitioner=s position that these provisions were intangibles
and not subject to sales tax.
APPLICABLE LAW
Utah Code Ann. Sec.
59-12-103 provides in pertinent part for sales tax as follows:
(1) There is levied a tax
on the purchaser for the amount paid or charged for the following: . . .
(k) lease and rentals of
tangible personal property if the property situs is in this state, if the
lessee took possession in the state, or if the property is stored, used, or
otherwise consumed in this state;
The Tax Commission in
implementing Utah Code Ann. Sec. 59-12-103 adopted Utah Administrative Rule
R865-19S-32 which provides as follows:
A. The lessor shall
compute sales or use tax on all amounts received or charged in connection with
a lease or rental.
The Tax Commission has
adopted the following rule for sales tax on charges to repair personal
property. Utah Administrative Rule
R865-19S-78 (D) (1) provides as follows:
Sales of extended
warranty agreements or service plans are taxable, and tax must be collected at
the time of the sale of the agreement.
The payment is considered to be for future repair, which would be
taxable . . .
In 1987 the Tax
Commission issued a Tax Bulletin clarifying issues concerning sales and use tax
on rentals. Tax Bulletin 14-87 provided
in pertinent part:
Damage waiver charges
that protect the lessee against the cost of repair to damaged equipment are
taxable.
DECISION AND ORDER
After reviewing the
information presented by the parties at the hearing, the relevant sections of
the Utah Code and the rules adopted by the Commission, as well as the case law
and prior Tax Commission decisions, the Commission sustains the assessment made
by the Respondent. It is so ordered.
This Decision does not
limit a party's right to a Formal Hearing.
Any party to this case may file 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 appeal rights in this matter.
DATED this 24 day of
March, 1998.
BY ORDER OF THE UTAH
STATE TAX COMMISSION.
Jane Phan
Administrative Law Judge
The agency has reviewed
this case and the undersigned concur in this decision.
DATED this 24 day of
March, 1998.
BY ORDER OF THE UTAH
STATE TAX COMMISSION.
W. Val Oveson Richard B. McKeown
Chairman Commissioner
Joe B. Pacheco Pam Hendrickson
Commissioner Commissioner
^^