November
15, 1991 Response from Tax Commission
October
31, 1991 Letter from XXXXX of XXXXX
XXXXX
c/o
XXXXX
Re:
Advisory Opinion -XXXXX Credit
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether sales tax should be charged by XXXXX on billings to lease customers
when passing on to the customer the exact amount of personal property tax paid
to the county assessor for the specific equipment covered by the lease.
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
may rely on the information contained in Tax Bulletin 14-87. Where they are
merely passing on to their lease customer, the exact amount of personal
property tax assessed on the equipment covered by a lease, no sales tax is due
on the amount of the property tax.
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 and a copy of the Utah Taxpayer's Bill of Rights are
attached.
For
the Commission,
Joe
B. Pacheco
XXXXX,
Auditor
Sales
Tax Auditor
Utah
State Tax Commission
Auditing
Division, Sixth Floor
160
East 300 South
Salt
Lake City, UT 84134-5000
Re:
Request for Advisory Opinion on Behalf of XXXXX
Dear
Mr. XXXXX:
This
is a follow-up to our telephone conversation earlier this year on the
collection of sales/use taxes on personal property taxes paid by a lessee of
equipment located in Utah. On behalf of XXXXX("XXXXX"), we hereby
request a technical advisory opinion on the below described procedure followed
by XXXXX:
FACTS
XXXXX
leases equipment to certain lessees in the State of Utah. XXXXX collects and remits to the State of
Utah sales tax on the lease payments received by XXXXX from Utah lessees. The
equipment leased in the State of Utah is also subject to Utah personal property
taxes. The personal property tax is assessed on each separate piece of leased
equipment by the County Assessor where the equipment is located. XXXXX pays the assessed personal property
tax directly to such collecting authority.
XXXXX then requests reimbursement from the responsible Utah lessee for
the exact amount of personal property taxes assessed and paid on each specific
piece of equipment. XXXXX is entitled to
such reimbursement pursuant to the terms of the lease agreement which provides
in applicable part as follows:
Lessee
shall promptly reimburse lessor for, as additional rent, all taxes, charges,
and fees imposed or levied by any governmental body or agency upon or in
connection with the purchase, ownership, leasing, possession, use or relocation
of the equipment . . . or otherwise in connection with transactions
contemplated by the lease.
QUESTION
PRESENTED
The
question raised is whether a sales/use tax should be collected and paid by
XXXXX to the State of Utah on the personal property tax reimbursed to XXXXX by
lessees of equipment located in the State of Utah.
SOURCES
OF AUTHORITY
Section
59-12-103 of U.C.A. provides that a sales/use tax is levied on the purchaser
for the amount paid or charged for the . . . "(k) leases and rentals of
tangible personal property if the property situs is in the state, if the lessee
took possession in this state, or if the property is stored, used, or otherwise
consumed in this state;" . . .
Utah
Administrative Code Rule R865-19-32S provides in applicable part as follows:
"When
a lessee has the right to possession, operation or use of tangible personal
property, the tax [sales or use] applies to the amount paid pursuant to the
lease agreement, regardless of the duration of the agreement."
Utah
State Tax Commission Tax Bulletin 14-87 provides the following with respect to
the assessment of sales tax on property taxes paid on leased equipment:
Prorated
property tax charges are taxable to the lessee as part of the rental unless the
lessee is responsible for paying the exact amount of the property tax directly
to the county assessor, or to the lessor who contractually collects the tax for
the lessee and holds it in trust (such as a tax reserve account) for later
payment to the assessor.
REQUESTED
TECHNICAL ADVISORY OPINION
XXXXX
requests a technical advisory opinion on the question presented which opinion
can be relied upon by XXXXX for Utah sales tax purposes. Please direct the
opinion to XXXXX in care of the undersigned. Because the lessee only reimburses
to XXXXX the exact amount of assessed personal property tax paid by XXXXX, the
above sources of authority suggest that no sales/use tax should be collected on
the reimbursed personal property taxes.
Please
advise if you need any additional information in order to render the requested
technical advisory opinion.
Very
truly yours,
XXXXX