95-014
Response September 2,
1994
I have been working
with the XXXXX office of the tax commission and have been instructed by two of
the collectors and by one of the auditors that I could legally collect sales
tax in a different way than I have previously.
My business sells and
installs fireplace and stoves into both new homes and existing homes. In the past we have listed the fireplace and
chimney hardware as the sale items, charge tax on those items, then listed the
labor charge to install those items into the house and totaled the
invoice. I understand that this is an
acceptable way of collecting the tax.
I have been told that
since we are installing an item into real property that cannot be removed from the
house that this type of fireplace from our manufacturing source is the taxable
transaction. So the current format that
I am using is this. We list the sales
price of the fireplace and the chimney parts on our invoices including in their
price the amount of tax on our cost of the item from the manufacturer. Then on the final line the amount of the
labor charged for the installation and total the invoice with no tax showing at
all.
When I file our
monthly sales tax report I list virtually all of my sales as exempt, but enter
on the line for “use tax” the goods purchased tax free and used by me.
I have been assured
after two separated monthly filings that this method is correct. What I would like is an opinion from the
commission that would verify that this new method for me in collecting and
filing my sales tax is correct.
Thank you for your
time and for responding to my inquiry as soon as possible.
Sincerely,
XXXXX
Re: Advisory Opinion -
Sales or Use Tax Application to Furnish and Install Fireplace\Stove Contracts
Dear XXXXX:
Your request for an
advisory opinion as to how sales or use tax applies in connection with your
sales and installations of fireplaces, stoves, and chimney hardware was
referred to the Auditing Division for their analysis.
The division’s staff
recommendations are as follows:
1.
When you furnish and install fireplaces, stoves and chimney hardware;
you are acting as a real property contractor for sales\use tax purposes. Administrative Rule R865-19-58S (copy
attached) provides that a real property contractor is considered to be the
consumer of items sold and converted to realty, As such, the real property
contractor is liable for tax on the material costs of items so converted. The tax applicable to the materials must not
be shown as a separate item on the sales document/contract with the
homeowner. The transaction between you
and the homeowner is not taxable.
2.
The “current format” that you are using is correct. When you make purchases of materials for use
in real property jobs, you should pay the tax to your supplier if the supplier
is licensed to collect the Utah tax. If
your supplier is not licensed to collect the Utah tax, then you must report and
pay the tax with your 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 judgement 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