95-044
Responses
August 3, 1995 and December 26, 1995 Response from the Tax Commission
Request
Mr.
Roger Tew
Utah
State Tax Commission
1950
West 210 North
Salt
Lake City, UT 84134
Dear
Commissioner Tew:
This
past year the State Legislature passed House Bill 274. The purpose of that bill is to provide an
exemption from sales tax for construction materials purchased for public
education. The effective date for this
exemption is January 1, 1996.
I
would like to know what procedure to follow to take advantage of this
exemption, as there may be a large number of contractors and subcontractors
making purchases on our behalf on any one project. An important part of that procedure would be how to handle
purchases on projects that start prior to January 1, 1996, but have materials
that will be purchased after that date.
Three
possible dates that might be used to determine if these purchases would qualify
for the exemption are: invoice date, delivery date, or payment date. I request an opinion from XXXXX, Coordinator
of School Law and Legislature for the Utah Department of Education. In his opinion we should go by the date that
ownership transfers, which is when the payment is made. This is similar to the opinion you expressed
when we talked on the phone, but I have talked with others whose opinions have
varied greatly.
I
would appreciate it if you would take this before the Tax Commission and let me
know how they are going to rule on the effective date and what procedures we
should follow. Expedience will be
appreciated so that we can plan our budgets accordingly. We may be the first to bring this matter up,
but I am sure you will be hearing from other school districts and institutions
of higher education between now and the end of the year.
Thank
you for your help in this matter.
XXXXX
Re:
Advisory Opinion - Sales Tax Exemption on Construction Materials
Dear
XXXXX,
We
received your request for an advisory opinion on the application of House Bill
274 to XXXXX construction projects. We
find as follows:
Construction
materials purchased prior to December 31, 1995 are subject to sales tax. Beginning January 1, 1996, construction
materials purchased by or on behalf of public school systems are exempt from
sales tax, so long as the construction materials are clearly identified and
installed or converted to real property which is owned by the institution. For construction projects that overlap the
effective date of the exemption, it is important to identify the date that the
sales transaction is complete.
The
sales transaction is complete when title passes. Utah Administrative Rule R865-19S-31 states:
Ordinarily, the time and place of sale are determined by
the contract of sale between the seller and buyer. Intent of the parties is the governing factor in determining both
time and place of sale subject to the general law of contracts. If the contract of sale requires the seller
to deliver or ship goods to a buyer, title to the property passes upon delivery
to the place agreed upon unless the contract provides otherwise.
Rule
R865-19S-31 reflects the statutory test for the passage of title set out in the
Uniform Commercial Code, section 70A-2-401 of the Utah Code. It states in part:
(1)...title to goods passes from the seller to the buyer
in any manner and on any conditions explicit agreed on by the parties.
(2) Unless otherwise explicitly agreed the title passes
to the buyer at the time and place at which the seller completes his
performance with reference to the physical delivery of the goods....
XXXXX
can control the moment that title passes by explicitly stating its intent
regarding passage of title in the contract of sale. If nothing is stated in the contract itself, the transaction is
complete upon delivery. With regard to
delivery, section 70A-2-401(2) of the Utah Code states:
(a) if the contract requires or authorizes the seller to
send the goods to the buyer but does not require him to deliver them at a
destination, title passes to the buyer at the time and place of shipment; but
(b) if the contract requires delivery at destination,
title passes to the buyer on tender there.
XXXXX
can take advantage of this exemption by structuring its agreements with its
contractors and suppliers so that the title to construction materials passes
from the supplier to the school district or the contractor (on behalf of the
school district) upon shipment, delivery or the occurrence of some other event
which takes place after January 1, 1996.
For
the Commission,
Alice
Shearer
Commissioner
Re:
Advisory Opinion - Requests for a refunds on construction materials
Dear
XXXXX,
You
requested information about how to request refunds for sales tax paid on
construction materials purchased on behalf of the XXXXX after January 1, 1996.
As we understand your situation, you are already under contract with various
contractors for on-going building projects over the next year or so. You asked if the XXXXX can apply directly to
the Tax Commission for refunds rather than rewriting existing contracts.
We
have discussed your situation with XXXXX of the Customer Service Division. He
agrees that you may apply directly to the Customer Service Division for
refunds. Although it is not mandatory,
we prefer that you file your refund claims quarterly, if possible.
Address
your refund claim to:
Utah
State Tax Commission
Customer
Service Division
Attn..
XXXXX
210
North 1950 West
Salt
Lake City, UT 84134
Include
in your request the date of purchase and the tax period (monthly or quarterly),
the name of the contractor, and the amount of tax paid. Retain documentation supporting your refund
claims with your tax records.
If
additional questions concerning your refund claim arise, feel free to contact
XXXXX directly at XXXXX.
For
the Commission,
Alice
Shearer
Commissioner