97-1239
SALES
Signed 11/13/97
BEFORE
THE UTAH STATE TAX COMMISSION
____________________________________
COMPANY C, )
:
Petitioner, ) ORDER
:
v. ) Appeal No. 97-1239
:
AUDITING DIVISION OF THE ) Account
No. #####
UTAH STATE TAX COMMISSION, :
STATE OF UTAH, )
:
Respondent. ) Tax Type: Sales Tax
_____________________________________
STATEMENT
OF CASE
This matter came before the Utah State Tax
Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. '59-1-502.5, on October 16, 1997. G. Blaine Davis, Administrative Law Judge,
heard the matter for and on behalf of the Commission. Present and representing Petitioner was PETITIONERS REP.. Present and representing Respondent was Ms.
Susan Barnum, Assistant Attorney General, together with Mr. Gil Naisbitt, from
the Auditing Division.
Respondent performed an audit on the books
and records of Petitioner for the audit period of January 1, 1994 through
December 31, 1996. As a result of the
audit, an assessment of an additional $$$$$ was made for additional taxes plus
interest at the statutory rate.
All issues have been resolved except sales
tax on computer maintenance agreements, which represents only $$$$$ of the
additional tax imposed by Respondent.
Petitioner has appealed because they were
told by the auditor that the service contract was not taxable if upgrades were
not included, and they represent that the service contract does not include any
upgrades. There is also a question
regarding whether the maintenance was performed over the telephone or included
other work or computer diskettes to correct the software. Respondent, in its answer, acknowledges that
if the contract was only for telephone maintenance support, then it was
probably tax exempt. The facts
presented at the hearing indicate that much of the service was over the
telephone, but that some of the maintenance was performed by providing computer
diskettes to provide changes to computer programs. The position of Respondent is that if a diskette is included, it
is tangible personal property and is therefore taxable.
Utah Administrative Rule R865-19S-78(d)
provides for sales tax on extended warranty agreements, and provides as
follows:
ASales 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. . . Repairs made under an extended warranty
plan are exempt from tax, even if the plan was sold in another state.@
DECISION
AND ORDER
Based upon the information presented at the
hearing, and the records of the Tax Commission, the Commission finds that the
audit assessment made by Respondent against Petitioner was for an extended
warranty pursuant to the rule, and that the audit assessment should be
sustained. The Petition for
Redetermination is therefore denied.
This decision does not limit a party's right
to a Formal Hearing. However, this
Decision and Order will become the Final Decision and Order of the Commission
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, Utah 84134
Failure to request a Formal Hearing will
preclude any further administrative action or appeal rights in this matter.
DATED this 13 day of NOVEMBER, 1997.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
W. Val Oveson Richard
B. McKeown
Chairman Commissioner
Joe B. Pacheco Pam Hendrickson
Commissioner Commissioner
^^