Response April 4, 1994
Request
via Fax XXXXX
From: XXXXX
XXXXX
via Fax XXXXX
Re: Sales & Use
Tax Compliance
Request for an Advisory
Opinion
We are a manufacturer
of custom staircase in Utah. Some
contracts are written “turnkey” meaning we fabricate the stair in our shop,
then install the stair in a home or commercial project. Other contracts are written as “delivered
only,” meaning we fabricate the stair in our shop and ship it via our truck or
common carrier. Please comment on the
flowchart below, and if necessary, make any connections. January is our first month and we’ll need to
know right away.
Thank You,
Chart may be found in
Tax Commission Files.
Re: Advisory Opinion - Application of
Sales or Use Tax to Various Transactions Involving Custom Staircases, Both
Installed and Not Installed
Dear XXXXX:
Your request (copy attached) for an
advisory opinion as to how sales or use tax applies to various transactions
involving your production and sale of custom staircases was referred to the
Auditing Division for their analysis.
The division's staff recommendations are
as follows:
1.
Under provisions of Administrative Rule R865-19-58S (copy attached) a
contractor who purchases, fabricates in XXXXX, and installs items which become
a part of real estate is considered as the consumer of materials so used. As
such, XXXXX is responsible to the Utah State Tax Commission for sales or use
tax on all material used in the process or converted to realty. This is
generally true regardless of customer or whether the installation takes place
in Utah or elsewhere. Your flowchart seems to fairly represent this responsibility.
The tax should not be collected from your customer as a separately stated item.
2.
Staircases which are sold to homebuilders, contractors, etc., without
XXXXX's being responsible for installation or conversion to realty are considered
retail sales. For such cases, the entire sales price (including any charges for
freight, handling, delivery, etc., up to the point where title passes) is
generally subject to the sales tax if possession is taken by the customer in
Utah. The tax should be collected as a separate item from the customer. See
R865-19-51S (copy attached).
3.
If staircases are sold at retail or wholesale (not installed by XXXXX or
its subcontractors), and shipped by common carrier or delivered by your own
vehicles outside the State of Utah, the sales are exempt if the conditions of
R865-1944S (copy attached) are met.
4.
Sales made in Utah without installation which are for resale are exempt
if proper documentation is retained by the seller to evidence the exemption.
Rule R865-19-23S (copy attached) explains resale exemption verification
requirements.
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,
Alice Shearer
Commissioner