February
10, 1992 Response from Tax
Commission
December
2, 1991 Letter from XXXXX of XXXXX
November
5, 1991 Letter from XXXXX of XXXXX
XXXXX
Re:
Sales Tax on Computer Equipment Used by a Newspaper
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether sales tax is due on the lease of computer equipment used to produce the
layouts for a newspaper.
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 recommendations. The division's recommendations are as follows:
1. It appears the specialized computer hardware
and software were purchased for use in an expanding manufacturing facility.
Utah Code Section 59-12-104(15) does provide an exemption for sales or leases
of qualifying machinery or equipment. The lease agreements with XXXXX and XXXXX
are exempt from sales or use tax.
2. Sales Tax Rule R865-19-32S says that a
leasing company should purchase its equipment for lease on a tax-free basis and
collect tax from the lessee on the total amount of the lease payments. XXXXX should immediately apply for a sales
tax license and issue an exemption certificate to the seller, XXXXX, requesting
a refund of the tax paid upon purchase. XXXXX may then take a credit on their
next quarterly sales tax return.
Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division's recommendations. 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
Commissioner
Utah
State Tax Commission
Heber
M. Wells Bldg..
160
East 300 South
S.L.C.,
UT 84134
Attn:XXXXX
- Auditing Division
REQUEST
FOR ADDITIONAL INFORMATION ON XXXXX COMPUTER SYSTEM
Dear
XXXXX,
Pursuant
to your request ,11/29/91, the following letter is intended as a description of
the newly purchased computer system for XXXXX. Due to the rapidly changing
economic climate in the XXXXX County area, the XXXXX purchased a fully
integrated computer system in an effort to meet the expansion needs of our
newspaper in a rapidly growing community. Over the last three years the
circulation of the newspaper has grown by roughly 10% per year. In addition,
the retail base has grown dramatically forcing us to run bigger newspapers in
terms of number of pages. While we have added personnel to our production and
editorial departments, it is thru this computer system that will facilitate our
ability to grow with the community. The system is designed to allow us to
actually build newspaper pages on screen and incorporate all aspects of
production into a central system. Aside from the actual printing of the
newspaper, the system brings together editorial production, advertising
production, classified, legal and mail functions into one unit, basically
streamlining our production requirements.
If
you have any additional questions please let me know.
Sincerely,
XXXXX,
Publisher
Utah
State Tax Commission
Heber
M Wells Bldg..
160
East 300 South
S.L.C.,
UT. 84134
Attn:XXXXX
- Auditing Division
REQUEST
FOR AN ADVISORY OPINION-11/5/91
Dear
XXXXX,
The
XXXXX purchased a computer system on Oct 3, 1991 from a Utah Company called
XXXXX. The XXXXX arranged leasing agreements with XXXXX and XXXXX to fund the
equipment on separate leases. The XXXXX lease fell through after the XXXXX
lease had funded the equipment and the equipment had been installed. XXXXX was then formed to fund that portion
of the equipment that XXXXX fell through on. On Friday, Nov. 1, XXXXX funded
the remaining balance of the computer system on behalf of the XXXXX to XXXXX
and paid for the price of the equipment plus Utah sales tax. (note-XXXXX is
still in the process of formation and has not yet received its tax number) It
is the intention of XXXXX to add the cost of the equipment plus the sales tax
to determine a payment schedule for the lessee.
QUESTIONS
1
- Should the portion of the Computer
System funded by XXXXX (soon to be a Utah Partnership) have any sales tax at
all- the system was purchased for the Manufacturing of Newspapers which I
understand has a sales tax exemption when all companies concerned are Utah
companies- please advise.
2- Should you determine that a sales tax is
required, can XXXXX request a sales tax refund from XXXXX and pay the state as
the leasing company and show the tax as part of the lease payment from the
XXXXX and then pay the state quarterly.
3- Should you determine that no sales tax is
required can XXXXX request a sales tax refund from XXXXX and have XXXXX receive
a sales tax credit.
I
am requesting an opinion not only as a partner of XXXXX but also as Publisher
of the XXXXX.
Sincerely,
XXXXX