Response March 3, 1995
Request
March 3, 1995
W. Val Oveson, Chairman
Utah State Sales Tax Commission
210 N. 1950 W.
Salt Lake City, UT 84134
Dear Sir:
We would like your assistance in helping us to resolve a sales-tax
collection issue affecting the manner in which the new corporation my associates
and I are in the process of forming will pay/collect, sales tax within the
state of Utah.
Our new company, XXXXX, will manufacture and distribute automatic and
manual pool covers throughout the United States. We are aware that once this corporation begins to transact
business, no sales tax will be charged to our out-of-state dealers who purchase
and install their own covers, but, there seems to be a question as to whether
we should collect sales tax during retail transactions within the state of
Utah. I recently had a discussion with
a gentleman alleged to be a retired employee of the State Tax Commission. He was quite emphatic that we should not
charge customers sales tax when they purchase our pool covers because they
fasten with screws to the deck and, according to him, would be considered
"permanent property' and, therefore, "tax- exempt."
I attempted by telephone on two separate occasions to get a
clarification of our sales tax responsibility.
On the first occasion that I spoke with a representative from the State
Tax Commission, I was told that we should collect sales tax on the purchase
price of our pool covers. On the second
occasion, however, I was told just the opposite. Obviously, it is paramount that we get an official clarification
in writing as to the manner in which we are responsible for collecting/paying
sales tax.
I have the following concerns: (1) In order to survive in business, it
is imperative that we play by the same tax rules as my competitors and other
retailers of "similar" products.
ALL OF MY COMPETITORS in Utah (some of whom have been in business in
excess of thirty years) charge their retail customers sales tax and, therefore,
purchase their raw manufacturing materials on a tax exempt basis. If we were required to pay tax on raw
materials (in lieu of collecting sales tax from retail customers), driving up
our cost of doing business, when all the companies we compete against are not
subject to this expense, we would be unable to compete. (2) In addition, I know of many retail
products outside of the pool cover industry that are similar to our products to
the extent that they require some installation, yet they are apparently subject
to sales. For instance, just recently,
an associate purchased from Sears a new automatic garage door opener, installed
by Sears' technicians. He was charged
sales tax on the retail price of the opener, even though it was fastened to the
ceiling of his garage with screws (Question: Is it then permanent
property?). Our covers are just as
easily installed (or dis-installed) as the Sears garage door opener; therefore,
it would seem reasonable that if the sales tax were appropriately collected by
Sears, it would be equally appropriate for us to collect sale tax on our covers
during retail sales. We would like to know that, whichever tax-rules apply, we
will be allowed to "play on the same playing field" as our
competition so that we can remain in business.
Please advise, and if you require additional information as to the
nature of our product or its installation, please call our office at XXXXX, or
write to us at the following address: XXXXX XXXXX, XXXXX, Utah XXXXX.
Sincerely,
XXXXX
TO: XXXXX
FROM: XXXXX
DATE: March 14, 1995
SUBJECT: Request for Advisory Opinion - No. 95-013DJ
Attached is a request for an advisory opinion from XXXXX of XXXXX. Will you please review the request of XXXXX
for an advisory opinion regarding a sales tax collection issue.
Please prepare the response for signature by the Commission as per the
guidelines established by them.
Thank you.
XXXXX