95-056
Response
September 5, 1995
Request
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, Utah 84134
Attn:
XXXXX
Re: Advisory opinion for school construction
Dear
XXXXX,
The
XXXXX is a licensed contractor. Our
typical customers are general contractors for new school construction. The
XXXXX supplies and installs metal lockers, telescopic bleachers, outdoor
grandstands, projection screens, auditorium seats and other finish items for
new school and school remodeling construction.
These items are real property.
We
typically are under contract with a general contractor, not the school
district.
We
have been paying the tax on the material costs directly to the tax commission.
I
recently received a tax bulletin, which in our opinion eliminates the tax that
we have been paying on materials for school district projects.
We
would like an opinion from the Utah State Tax Commission on how to interpret
the status of school districts in XXXXX for our future bidding/work.
Best
Regards,
XXXXX
XXXXX
RE: Exemption on construction materials
purchased on behalf of schools
Dear
XXXXX,
We
have received your request for information regarding the new exemption for
sales of construction materials purchased by or on behalf of a public
school. We offer the following
information to help you better understand this exemption.
During
the XXXXX legislative session, the legislature amended section 59-12-104 of the
Utah Code to expand the sales tax exemption to construction materials purchased
by or on behalf of public schools. The
exemption is effective XXXXX. The
following conditions establish eligibility for this exemption:
1. Construction materials purchased prior to
XXXXX are subject to sales tax.
Beginning XXXXX, 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. Even though you act as a subcontractor
rather than general contractor, the exemption applies to construction materials
that you purchase on behalf of the school on or after XXXXX.
2. For construction projects that overlap the
effective date of the exemption, it is important to identify the date that the
sales transaction is complete. Only
sales completed on or after XXXXX are exempt.
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 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 explicitly agreed on by the parties.
(2) Unless otherwise explicitly agreed 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 ....
The
school 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 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.
Please
let us know if we can answer any other questions.
For
the Commission,
Alice
Shearer
Commissioner