97-1257

SALES & USE

Signed 10/30/97

 

 

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

 

COMPANY A, )

:

Petitioner, ) ORDER

:

v. ) Appeal No. 97-1257

:

AUDITING DIVISION ) Tax Type: Sales and Use

UTAH STATE TAX COMMISSION :

)

Respondent. )

:

_____________________________________

 

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 September 22, 1997. W. Val Oveson, Commission Chair, heard the matter for and on behalf of the Commission. Representing Petitioner by telephone, was PETITIONERS REP., Certified Public Accountant. Present and representing Respondent was Barry Vincent, Audit Manager.

The issue in this case is the application of Utah Code 59-12-104(33) which allows an exemption for Asales of tangible personal property to persons within this state that is subsequently shipped outside the state and incorporated pursuant to contract into and becomes a part of real property located outside of this state, except to the extent that the other state or political entity imposes a sales, use, gross receipts, or other similar transaction excise tax on it against which the other state or political entity allows a credit for taxes imposed by this chapter;@


Petitioner purchased personal property, and used it in Utah, to manufacture fabricated property. That property was subsequently shipped to Nevada by Petitioner, under its contract, and installed and converted to real property. Petitioner did not pay sales or use tax on its purchases of the property in Utah.

Following an audit, Respondent assessed the use tax to Petitioner on the basis that Petitioner had not applied for a refund of tax paid to Nevada. In response, Petitioner submitted refund requests to the Nevada Revenue Department. The Nevada Revenue Department informed Petitioner that it would not issue refunds on transactions occurring prior to July 1, 1995. For transactions after that date, refunds would only be issued for sales tax paid directly by the real property contractor on items installed and converted to real property in Nevada. No refunds would be issued for use tax paid in another state.

By the plain language of the statute, no Utah tax may be collected on these sales unless (1) the sales are also taxable in the state of destination, and (2) the destination state allows a credit for taxes paid in Utah. The transaction at issue here met the first condition of taxability in that it was taxable in Nevada. However, it did not meet the second condition because Nevada does not allow a refund for use tax paid in Utah.


Respondent has taken the position that the taxpayer should pay the Utah tax up front, then pay the tax due in the destination state, and then if offered a credit or refund in the destination state, apply for a refund in Utah. This practice is unnecessarily cumbersome. As to these types of transaction, the Commission finds that these transactions are only taxable if the transaction is also taxable in the destination state and that state allows a credit for taxes paid in Utah. Otherwise the purchaser may purchase the property tax free in Utah by use of an exemption certificate.

DECISION AND ORDER

Based upon the foregoing, Commissioner Oveson issued a bench ruling at the hearing in favor of Petitioner and overturning the assessment. It is so ordered.

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 appeal rights in this matter.

DATED this 30 day of OCTOBER, 1997.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Richard B. McKeown

Chairman Commissioner

 

Joe B. Pacheco Pam Hendrickson

Commissioner Commissioner

 

 

WVO/97-1257.ord