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