April
15, 1991 Response from Tax
Commission
March
1, 1991 Letter from XXXXX, CPA
of XXXXX
XXXXX,
CPA
Re:
Sales Tax on Fix-Up Expenses
Dear
XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether you can make tax-free purchase of parts and service to fix-up equipment
which is no longer in use in order to enhance the equipment for a higher sales
price. The equipment is sold through a licensed auctioneer. You will also buy
some equipment from a leasing company in order to sell it through the
auctioneer.
The
Tax Commission policy is to refer such requests to the division most qualified
to analyze the request and make recommendations concerning it. As such, your
request was referred to the Tax Commission's Auditing Division for their
analysis and recommendation. The division's recommendation is as follows:
XXXXX
is making purchase of parts and repair services for equipment owned by
themselves and still held as fixed assets. They are not a retailer or
wholesaler of these types of goods or services; therefore, they must pay tax on
such purchases, including equipment purchased from a leasing company. It is no
different from a private citizen upgrading his vehicle to make it more salable.
The
sale of the equipment required to be titled or registered does not qualify by
statute for the isolated or occasional exemption. The equipment not required to
be titled or registered may qualify for the isolated or occasional exemption
depending upon the number of transactions, if it were not sold through an
auctioneer. Rule R865-19-38S excludes sales of items at auctions from this
exemption.
Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division's recommendation. Obviously, if there are deviations from these facts,
this opinion may be negated.
If
you do not agree with this determination, you may appeal to the Tax Commission
for a formal hearing. The results of that hearing would constitute a
declaratory judgment and be appealable to the Utah State Supreme Court. A
Notice of Appeal Rights is attached.
For
the Commission,
Joe
B. Pacheco
Commissioner
Mr.
XXXXX
Utah
State Tax Commission
160
East 300 South
Salt
Lake City, Utah 84134
RE:
Sales Tax on Fix-up Expenses and Lease Buyouts for Auction Assets
Dear
Mr. XXXXX:
We
are requesting a ruling with regards to the applicability of sales tax to our
situation:
XXXXX
is a transportation company in the business of hauling for hire various
commodities both within and without the state of Utah. XXXXX utilizes both
licensed and on-licensed equipment in its operations. This equipment may either
be owned outright or leased from various finance companies.
XXXXX
sells some of its used equipment (usually licensed equipment) at various times
during the year. Also XXXXX annually accumulates its excess equipment and sells
the equipment through a reputable equipment auction company (XXXXX i.e.)
licensed to collect Utah sales tax. In preparation for these sales and auction,
XXXXX engages various vendors to perform painting and repair work on specific
equipment to enhance their final selling price. The same vendors may be used at other times on equipment XXXXX
continues to use in its business. In order to get title to leased equipment
sold, XXXXX will also buyout the specific equipment from the finance companies.
The auction company Collects and remits sales tax on all equipment (both
licensed and non-licensed) sold at the auction.
Currently,
XXXXX is paying sales tax on the fix-up expenses and lease-buyouts for its
equipment sold. Can these purchases be made tax-free as purchases for resale
since the purchases can be directly traced to each specific piece of equipment?
On
occasion we have been advised by sales tax auditors that such purchases would
not be sales tax exempt as we are not considered a dealer in this type of
equipment. We have also been advised that since we sell equipment more than
twice a year that we are considered a dealer in equipment for purposes of the
isolated and occasional sale exemption. These two positions seem to be
inconsistent.
Can
we provide exemption certificates marked "For Resale" to our vendors
and finance companies with regards to any equipment identified for resale
whether sold through the auction or directly by us?
We
would appreciate a timely response to this inquiry. If you have any questions,
please call.
Respectfully
XXXXX,
CPA
Tax
Manager
XXXXX
April
10, 1991 Response from Tax
Commission
March
6, 1991 Letter from XXXXX of
XXXXX
XXXXX
Re:
Advisory Opinion - Isolated or Occasional Sale
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether the sale of an entire business by a licensed auctioneer qualifies as an
isolated or occasional sale.
The
Tax Commission policy is to refer such requests to the division most qualified
to analyze the request and make recommendations concerning it. As such, your
request was referred to the Tax Commission's Auditing Division for their
analysis and recommendation. The division's recommendation is as follows:
An
auctioneer is in the business of selling whatever items or commodities he
contracts to sell. Administrative rule R865-19-38S F. specifically excludes
items sold at public auctions from the isolated or occasional sale exemption.
Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division's recommendation. Obviously, if there are deviations from these facts,
this opinion may be negated.
If
you do not agree with this determination, you may appeal to the Tax Commission
for a formal hearing. The results of that hearing would constitute a
declaratory judgment and be appealable to the Utah State Supreme Court. A
Notice of Appeal Rights is attached.
For
the Commission,
Joe
B. Pacheco
Commissioner
Utah
State Tax Commission
XXXXX
6th
Floor
Heber
Wells Building
160
East 3rd South
Salt
Lake City, Utah 84134
Re:
XXXXX Sales and Auctions tax audit
XXXXX,
Would
you please advise me in writing, why I am not exempt from collecting sales tax
on isolated or occasional sales of an entire business to a single buyer.
Thank
you,
XXXXX