99-0960

SALES

Signed 7/8/00

 

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

 

PETITIONER, ) FINDINGS OF FACT,

) CONCLUSIONS OF LAW,

) AND FINAL DECISION

Petitioner, )

)

v. ) Appeal No. 99-0960

)

TAXPAYER SERVICES DIVISION OF )

THE UTAH STATE TAX ) Tax Type: Sales

COMMISSION, )

) Judge: Phan

Respondent. )

_____________________________________

 

Presiding:

Palmer DePaulis, Commissioner

Jane Phan, Administrative Law Judge

 

Appearances:

For Petitioner: REPRESENTATIVE FOR PETITIONER

For Respondent: Brian L. Tarbet, Assistant Attorney General

 

 

STATEMENT OF THE CASE

This matter came before the Utah State Tax Commission for a Formal Hearing on June 1, 2000. Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:

FINDINGS OF FACT

1. Petitioner is appealing the denial by Respondent to issue a refund of Utah sales and use, transient room and tourism tax.


2. The amount of tax at issue is $$$$$. There is no dispute as to the amount of the tax or how it was calculated by Petitioner based on the travel of its employees in Utah. The parties stipulated to the relevant facts in this matter and submitted Stipulated Facts on March 38, 2000. The Commission's Findings of Fact are based largely on the Stipulated Facts.

3. The period at issue is from July 1996 through April 1999.

4. On or about August 30, 1999, Petitioner submitted to Respondent a claim for refund of the tax at issue, based upon the contention that its employees, while on official government business, are a constituent part of the federal government.

5. On October 13, 1999, Respondent issued to Petitioner a Statutory Notice denying Petitioner's Claim for Refund based upon Administrative Rule 865-19S-41.

6. On or about November 17, 1999, Petitioner filed with the Tax Commission, Appeals Division, a Petition for Redetermination.

7. Petitioner's employees are issued credit cards for use while on official government business. The credit cards are issued to employees and charges incurred thereon are billed directly to the employee by the card issuer. The employees then seek reimbursement for all or part of their travel expenses from the department.

8. The present case involves hotel and rental car purchases for which sales and use and related taxes were paid on said hotel and rental purchases.

9. The NAME is an agency of the federal government, and its employees, while carrying on official duties entrusted upon them in the scope of their employment, are employees of the federal government.

APPLICABLE LAW

Utah Code Ann. '59-12-103(1)(i) and (k) (1996) states as follows:

(1) There is levied a tax on the purchaser for the amount paid or charged for the following:

(i) tourist home, hotel, motel, or trailer court accommodations and services for less than 30 consecutive days;

. . .

(k) leases and rentals of tangible personal property if the property situs is in this state, if the lessee took possession in this state, or if the property is stored, used or otherwise consumed in this state; . . .

 

Utah Administrative Rule R865-19S-41 states:

A. Sales to the United States government are exempt if federal law or the Untied States Constitution prohibits the collection of sales or use tax.

 

B. If the United States government pays for merchandise or services with funds held in trust for nonexempt individuals or organizations, sales tax must be charged.

 

C. Sales made directly to the United States government or any authorized instrumentality thereof are not taxable, provided the sale is paid for directly by the federal government. If an employee of the federal government pays for the purchase with his own funds and is reimbursed by the federal government, that sale is not made to the federal government and does not qualify for the exemption.

. . .

CONCLUSIONS OF LAW

1. The sales at issue in this appeal were paid for by an employee of the federal government with his or her own funds and the employee was then reimbursed by the federal government. Utah Administrative Rule R865-19S-41.C specifically provides that these purchases do not qualify for the exemption.

2. Petitioner argues that the rule as applied in this case is unconstitutional as the legal incidence of the tax falls on the Federal Government. Respondent argues that the legal incidence of the tax fell upon the employees as private citizens, not as instrumentalities of the government. [1] The Commission agrees with Respondent that the legal incidence of the transaction falls on the individual employees. The employee paid for the hotel and rental charges using a credit card issued in the employees name. The credit card company issued an invoice to the employee, not Petitioner. For this reason the Commission finds that the sales tax does not violate the Supremacy Clause of the Untied States Constitution.


3. There are several cases from other jurisdictions addressing this issue. Petitioner noted two state court decisions which considered facts similar to those presented here and determined that the assessment of tax violated the Supremacy Clause of the United States Constitution. PETITIONER. v. State, Department of Revenue, 559 So. 2d 264, 268 (Fla. App. 1990); PETITIONER v. Comm. of Pennsylvania, 557 A.2d 1157, 1159 (Pa.Comm. 1989).[2] Two other cases also considered virtually identical facts and upheld the sales tax assessments. PETITIONER v. Norberg, 486 A.2d 613 (R.I. 1985); Comptroller v. World Inns, 528 A.2d 477 (Md. 1987). Because all the decisions are from other states, none of them are controlling here. Nevertheless, we find the reasoning in the latter two cases to be persuasive. In the language of the Maryland court, A . . . the federal employees were the >purchasers= within the meaning of the Act. They contracted directly with World Inns for the rental of rooms and paid for the rooms with their personal funds. The federal government was in no sense a party to the room rental arrangement. Consequently, the legal incidence of the tax fell on the employees and not on the United States.@ 528 A.2d at 481. Neither was the federal government a party to the room rental arrangements or the car rental agreements here.

DECISION AND ORDER

Based upon the foregoing, the Tax Commission denies Petitioner's Petition for redetermination. It is so ordered.

DATED this __8___ day of ___August_________, 2000.

 

_____________________

Jane Phan

Administrative Law Judge

 

BY ORDER OF THE UTAH STATE TAX COMMISSION:

The Commission has reviewed this case and the undersigned concur in this decision.

DATED this __8___ day of __August__________, 2000.

 

Pam Hendrickson R. Bruce Johnson

Commission Chair Commissioner

 

Palmer DePaulis Marc B. Johnson

Commissioner Commissioner

 

 

Notice of Appeal Rights: You have twenty (20) days after the date of this order to file a Request for Reconsideration with the Tax Commission Appeals Unit pursuant to Utah Code Ann. '63-46b-13. A Request for Reconsideration must allege newly discovered evidence or a mistake of law or fact. If you do not file a Request for Reconsideration with the Commission, this order constitutes final agency action. You have thirty (30) days after the date of this order to pursue judicial review of this order in accordance with Utah Code Ann. ''59-1-601 and 63-46b-13 et. seq.

 

 


[1]Respondent points to the discussion of the legal incidence test in Thiokol Chemical Corp.v. Peterson, 393P.2d 391 (Utah 1964).

[2]It could be argued that Egner was decided on statutory, rather than constitutional grounds, the Court holding that the Pennsylvania statute Adoes not require payment directly by the federal government. . . .@ 557 A.2d at 1160.