December
13, 1991 Response from Tax Commission
November
27, 1991 Letter from XXXXX of XXXXX
XXXXX,
CPA
Tax
Manager
Re:
Separate Corporation to Sell Used Equipment
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether a separate corporation could be formed for the purpose of buying XXXXX
companies used equipment, either from XXXXX or a company leasing equipment to XXXXX
on a tax-free basis and have needed repairing or upgrading done on a tax free
basis. The separate company would then sell the equipment at wholesale, retail
or through an 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:
The
separate legal entity would be created for the purpose of being a dealer of
used equipment. As such, it should purchase all the used equipment and
necessary parts and service to repair and upgrade the equipment tax-free. The
company should apply for a retail sales tax license and issue an exemption
certificate to XXXXX or a leasing company. It should then collect tax on any
retail sales or obtain the necessary documentation if any sales are exempt. The
company must apply to the Motor Vehicle Enforcement Division for a vehicle
dealers license, since some of the equipment involved would be vehicles of a
type required to be registered.
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
Commissioner
MR.
XXXXX
ASSISTANT
DIRECTOR, AUDITING
UTAH
STATE TAX COMMISSION
Dear
Mr. XXXXX:
In
connection with our conversation on November 19th, XXXXX requests a ruling with
regards to applicability of sales tax to the situation outlined as to the
purchase and refurbishing of used equipment prior to sale or auction.
The
same set of facts is presented as outlined in our petition for redetermination
dated April 15, 1991 except for one change in structure. XXXXX will continue to be the transportation
company as described previously. XXXXX
proposes to use a separate legal entity (XXXXX, for purposes of this ruling) to
carry on the purchasing, refurbishing, & selling activities described
previously.
XXXXX
would be a brother-sister corporation to XXXXX (both entities owned 100% by the
same parent - The XXXXX).XXXXX would provide tax-exempt certificates to vendors
providing painting and repair work on equipment intended to be resold or put in
an auction. XXXXX would provide tax-exempt certificates to XXXXX when acquiring
XXXXX's used assets that are intended to be resold or put in an auction. XXXXX would also provide tax-exempt
certificates to leasing companies when acquiring previously leased equipment
that is intended to be resold or put in an auction. XXXXX would collect sales tax on final retail sales (no resale
exempt certificate received).
We
would appreciate a timely response to this inquiry due to the time constraints
on the hearing.
Respectfully,
XXXXX,
CPA
TAX
MANAGER