Response May 8, 1992
May, 8, 1992
XXXXX, Tax Attorney
Re: Sales Tax on Natural Gas
Dear XXXXX:
This letter is in response to your recent request for a Tax Commission ruling
on whether sales or use tax is due on the sale of natural gas delivered via a
pipeline with title passing in Utah.
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:
1a.
The gas is sold to a broker for resale. The sale is exempt and the seller should
have an exemption certificate from the resale customer.
1b.
The gas is sold to an end user who is located in another state. Possession
takes place in Utah where title passes to the end user who then transports the
gas to his out-of-state location. Sales Tax Rule R865-19-44S states "When
a commodity is delivered to the buyer in this state, even though the buyer is
not a resident of this state and intends to transport the property to a point
outside the state, the sale is not in interstate commerce and is subject to
tax."
1c.
Gas sold to a local distribution company (utility company) is exempt as a
resale transaction even though title and possession passes while in a pipeline
in Utah.
1d.
Utah does accept a resale exemption certificate from a purchaser in another
state.
2.
The fact that gas is delivered into the transportation pipeline from another
state does not change any of the answers to 1, above.
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 Bill of Rights are attached.
For
the Commission,
Joe
B. Pacheco
Commissioner
Commissioner
Hal Hansen
Utah
State Tax Commission
160
East 300 South, Fifth Floor
Salt
Lake City, Utah 84134
Re:
Request for Advisory Opinion/Ruling
Dear
Commissioner Hansen:
In
the past year, changes in the marketing of natural gas have occurred. Resellers
and end-users are now allowed to buy gas directly from a marketing company and
to have transportation rights on gas transmission pipelines. Title and
possession will transfer based on the point in the pipeline at which the
purchaser's transportation rights begin.
We
are requesting guidance on the application of your Sales and Use tax (Sales
tax) in the following situations. The sales may be in the spot market or based
on long-term contracts. The pipelines are assumed to be common carriers, and
Meter X is the point in the common carrier pipeline where the purchaser's
transportation rights begin. It is also assumed that the purchaser is not
registered for Sales tax purposes in your state.
1) Gas is produced in your state.
a) The gas is sold to a broker for resale.
Title and possession passes while in the pipeline to the broker at Meter X in
your state for ultimate delivery outside your state.
b) The gas is sold to an end-user who is
located in another state. The title and possession passes while in the pipeline
to the end-user at Meter X in your state. The gas is purchased for use by the
end-user in another state.
c) The gas is sold to a local distribution
company (XXXXX) located in another state which is classified as a utility or
reseller. The title and possession passes while in the pipeline to the XXXXX at
Meter X in your state but the gas will be sold in another state.
d) Is either a), b) or c) subject to your Sales
tax? Does an exemption or deduction from the tax apply, and, if so, what are
the rules for obtaining it? Will your Department accept an exemption
certificate issued by the purchaser registered in another state?
2) The same facts and questions as in 1) above,
except that the gas is produced and delivered into the transportation pipeline
from another state.
Your
prompt attention to this matter will be greatly appreciated. Please do not
hesitate to call or write to me if you have any questions regarding this
request.
Yours
truly,
XXXXX
Tax
Attorney