95-050
Responses
January 26, 1995 and August 29, 1995
Request
XXXXX, Sales Tax Auditor
Utah State Tax Commission
210 North 1950 West
Salt Lake City, UT 84134
Dear XXXXX:
I am writing to you regarding a question involving
interpretation of a provision of Tax Bulletin 31-94. This Bulletin covers payment of sales tax by governmental
entities on “construction materials.”
Construction materials are defined in the bulletin as “any tangible
personal property that will be converted into real property.”
My question arises from a situation in which XXXXX
is participating in construction of a booster pumping facility and storage tank
facility. The construction contract
required the City to furnish certain materials, including pumps, building
mechanical piping, flow meter, and telemetry equipment, which were to be
installed by the contractor. My
interpretation of the bulletin would be that the pumps, the meter and the
telemetry would be classed as equipment and remains as tangible, not real,
property and therefore not subject to sales tax. The mechanical piping, on the other hand, might be considered to
be converted to real property, although most of it is not part of the structure
and could be easily removed.
Please advise me in writing whether I have correctly
interpreted the rule. If you have any
questions or need additional explanation, please call me at XXXXX.
Sincerely,
XXXXX
XXXXX
Dear XXXXX:
In response to your letter of XXXXX (copy attached),
I am providing you with the following information.
I agree with your interpretation of Tax Bulletin
31-94 as it relates to the pumps, meter and telemetry. The items would appear to be ones which
remain tangible personal property after installation. Any portion of the piping that does not become part of the real
property structure, could be easily removed without damaging the piping itself
or the structure, and which connects the equipment items together would
similarly be expected to remain personal property, not “construction
materials.”
Respectfully,
XXXXX
Sales and Use Tax
Auditing Division
XXXXX
Sales
& Use Tax Auditing Division
210
No 1900 West
Salt
Lake City, UT 84124
Re: Tax
Bulletin 31-94
Dear XXXXX:
XXXXX, sells centrifugal pumps, both horizontal
& vertical primarily for water supply and distributions purposes together
with parts for the same. All of the
pumps sold and designed are readily removable for either moving to another site
or for repairs
You issued a letter dated XXXXX (copy enclosed) to
XXXXX City Water Department which says that these type of pumps "remain
tangible personal property after installation", and accordingly are exempt
for sales tax collection if sold to a municipality.
We need to know if this opinion can be applied by
our client's globally to all municipalities, assuming proper documentation is
secured? There appears to be some confusion with some suppliers and customers.
If you would like to discuss the matter please call
me.
Sincerely,
XXXXX
XXXXX
RE: Advisory Opinion - Application of sales tax
to centrifugal pumps sold to government entities for public water distribution
systems.
Dear
XXXXX,
Under
section 59-12-104 of the Utah Code, sales of tangible personal property to the
state and its political subdivisions are exempt from sales tax. However, sales of construction materials to
the state or other government entities are taxable unless the materials are
installed or converted to real property by the government entity's
employees. The exemption applies to all
municipal entities. However, the
question of whether sales of your client's pumps are taxable depends upon
whether they are classified as personal property or construction
materials. Without knowing the specific
details of each particular sale, we can only offer you the following general
guidelines:
Pumps,
metering equipment and telemetry equipment are generally deemed to retain their
character as personal property after installation on real property. The mechanical piping poses a more difficult
question. We would tend to look at the
manner in which it is installed in the building and the purpose that it
serves. For instance, if the piping is
essential to the use and enjoyment of the building, it may be viewed as real
property. For instance, the plumbing
installed in a residence is considered part of the realty. On the other hand, if the plumbing serves
only the pumping equipment, we may view it as personal property.
As
you can see, these determinations tend to be very fact-specific. If your client needs help in making these
determinations under a particular contract, please contact us for help.
For
the Commission,
Alice
Shearer
Commissioner