Response March 6, 2001
October 13, 2000
Dear Sir or Madam:
It has come to our attention through discussion with TAXPAYER REP in your office that there is a lack of documented rulings governing the treatment of tax issues concerning the manufactured homes retail line of business. Accordingly, we are writing to obtain an Advisory Opinion on the issue detailed below.
The retail sales price of a manufactured home may include the cost of initial entrance fee to a mobile home park where the home would be set. I would like to clarify that the entrance fee does not purchase the lot where the home is setup, it simply allows the customer to place the home at the allotted location and pays for various land improvements such as sprinkler systems, landscaping, etc already in place. The customer then takes over the monthly cost of renting the space. Is the one-time park entrance fee considered part of the taxable sale? Further, there have been instances where the purchase price included up to three years of rental payments. Are these rental costs considered to be part of the taxable sale?
There are various costs to setup a manufactured home. The sales price may include the cost of skirting, leveling, foundation work, utility hookups, deck and steps, awnings, etc. Are the costs to setup the manufactured home considered part of the taxable sale?
Please advise us on the sales tax treatment of these costs in your jurisdiction.
March 6, 2001
RE: Manufactured Homes Sales Tax Exemption
Dear Mr. NAME,
You have requested an advisory opinion concerning manufactured home sales and the sales tax implications that arise from placing a manufactured home in a mobile home park. First, you inquire whether a mobile home park’s initial entrance fee and prepaid rental payments are considered part of the purchase price of a manufactured home for sales tax purposes. Second, you ask whether sales tax is applied on set-up fees and accessories charged in association with the sale of a manufactured home. Before answering your specific questions, it will be helpful to understand how sales tax is applied on the sale of a manufactured home itself.
Sales Tax on Manufactured Homes. When you sell and install a manufactured home, you are considered a real property contractor under Utah Admin. Rule R865-19S-58, if you permanently anchor the manufactured home on real property in compliance with state installation standards and permanently attach it to plumbing, electrical systems and other utilities. This is true without regard to the nature of the foundation or slab that sits under the home or the owner of the underlying real property. As a real property contractor, you are liable for sales tax on your purchase price from the manufacturer, unless an exemption exists. Consequently, your company’s sale of the manufactured home and installation of it to real property would not be taxable.
On the other hand, when you sell a manufactured home without setting it up or installing it to real property as described above, your are not a real property contractor, but rather a seller of tangible personal property. Accordingly, you should collect sales tax on the sale of the manufactured home to your customer. In this case, you would not pay sales tax to your supplier when purchasing the home, as you have become a reseller of tangible personal property.
A partial exemption for new manufactured homes and a total exemption for used manufactured homes are provided in Utah Code Ann. §59-12-104(37), which exempts from taxation:
(a) 45% of the sales price of any new manufactured home; and
(b) 100% of the sales price of any used manufactured home.
As a result, when you act as a real property contractor by selling and installing a new manufactured home to the underlying realty, you are required to pay sales tax on 55% of the price you pay the manufacturer or supplier. When you sell a new manufactured home without installing it to the underlying realty, you should collect sales tax on 55% of the sales price you charge your customer. Whether you are acting as a real property contractor or seller of tangible personal property, there is no sales tax due on the purchase or sale of a used manufactured home.
Initial Entrance Fee and Prepaid Lot Rental. Utah Code Ann. §59-12-103(a) imposes tax on retail sales of tangible personal property. Utah Code Ann. Section §59-12-102(29)(b) specifies that “tangible personal property” does not include “real estate or any interest or improvements in real estate.” You state that the retail price of a manufactured home may include charges associated with placing the home in a mobile home park. One charge, invoiced as an entrance fee, allows the customer to rent a lot in the park and the park to recoup the costs of the real property improvements already in place, such as sprinkling systems and landscaping. From your description, we do not consider this particular charge to be for delivery or installation. If this is correct, the initial entrance fee is a charge for access to real property and reimbursement of the real property improvements already in place and, as such, is not subject to sales tax. Similarly, any lot rental payments, whether prepaid or not, are charges for access to the real property and are not subject to taxation.
The nontaxable entrance fee and lot rental charges must be separately stated from any taxable charge, or all charges are subject to taxation. For example, assume you sell a new manufactured home, without installing it to the underlying realty, for $$$$$. You also charge a $$$$$ entrance fee, which allows the owner to place the manufactured home in a mobile home park. In this case, only 55% of the manufactured home’s $$$$$ price is subject to taxation, as long as the $$$$$ entrance fee is separately stated on the invoice. However, if you invoice all charges as one lump sum of $$$$$, then tax would apply to 55% of the total $$$$$ charge.
Accessory and Set-Up Costs. You also sell accessories and services to “set-up” a manufactured home on the underlying realty. The accessories include skirting materials, decks, steps, and awnings. Set-up services include leveling the home, providing foundation work, installing the skirting materials, and hooking up the utilities. At issue is whether these items are taxable as part of the sale price of the manufactured home.
Accessories Sold as Part of the Real Property. As previously discussed, in a transaction where you are considered a real property contractor, you are liable for sales tax on 55% of the manufacturer’s sales price to you. For purposes of the exemption, a “manufactured home” is defined as a “transportable factory built housing unit . . . .” See Utah Code Ann. §§58-56-3(10), (11); 59-12-1002(14). We consider all items purchased from the manufacturer as part of the manufactured home “package” to qualify for the exemption. For instance, if the home comes to you from the manufacturer with awnings, a swamp cooler, furniture and appliances, these items qualify for the partial exemption.
Other items that you purchase separately and install to the realty, such as decks, steps, awnings, skirting materials, or cement for the pad are taxable to you at 100% of your purchase price. Your sale and installation of these items to your customer would not be taxable.
Accessories Sold as Tangible Personal Property. In a transaction in which you act as a seller of tangible personal property (e.g., the purchaser arranges installation), your customer is eligible for a 45% exemption from sales tax on the your selling price for the home as it arrived from the manufacturer. The exemption also applies to amounts you charge for “dealer add-ons,” items that are attached to and become an integral part of the dwelling prior to its delivery. For example, an awning, if attached to the manufactured home prior to delivery, would be the type of non-manufacturer item that would qualify for the exemption. Here again, as a reseller of tangible personal property, you would not pay any sales tax on your purchase of these items from the manufacturer or supplier.
In contrast, items such as skirting materials, carports, sheds, decks, and concrete or wood steps are not typically part of a transportable factory built housing unit because they are attached after delivery. In addition, awnings sold and installed after the manufactured home is delivered are not part of the transportable housing unit. Accordingly, these items are not eligible for the exemption and must be taxed at 100% of their sales price when they are sold as tangible personal property.
Installation and Other Set-Up Services. Utah Admin. Rule R865-19S-78(A)(2) states that “[s]eparately stated charges for labor to install personal property to real property are not subject to tax, regardless of whether the personal property becomes part of the real property.” Labor to level a home on a lot, dig a foundation, or hook up the utilities all involve installing a manufactured home to the underlying real property. Accordingly, all of these labor charges are nontaxable if itemized separately from taxable charges, regardless of whether the manufactured home becomes part of the underlying realty.
On the other hand, the taxability of labor charges to install tangible personal property, such as skirting, awnings, etc., to a manufactured home depends upon whether the manufactured home has become part of the underlying realty. For example, skirting materials are typically attached to the manufactured home and not to the underlying realty. Accordingly, if the manufactured home has become part of the underlying realty, the skirting materials are installed to real property and the labor charge is nontaxable. Nevertheless, if the sale of the skirting materials is taxable, as discussed above, the nontaxable installation charge must be stated separately or the entire charge is taxable. In contrast, if you install skirting materials to a manufactured home that has not yet become part of the underlying realty, the skirting materials are attached to tangible personal property, not real property, and the labor charge is taxable.
Please contact us if you have any other questions.
For the Commission,
Marc B. Johnson
 The entrance fee is not considered an admission or user fee that is taxable under Utah Code Ann. §59-12-103(1)(f). Admittance to a mobile home park is an admission described in Section 103(1)(f).