95-059
Response
September 26, 1995
Request
XXXXX
C/O
Utah State Tax Commission,
Administrative
Office
210
N. 1950 W.
Salt
Lake City, Utah 84134
Dear
Ms. Rees:
Recently
I contacted XXXXX of the Utah State Tax Commission, Customer Service Division
regarding a sales tax question. He has
referred me to you to obtain a determination or a copy of documentation of
procedures and policies or regulations that govern the following matter.
It
is my understanding that if a company leases equipment to somebody else, that
sales tax needs to be charged with that lease payment.
1: If the equipment purchased had sales tax
paid at the time of purchase, does sales tax then again need to be charged on
the lease payment?
2: If the lease agreement is for a building and
equipment combined, it is my understanding that sales tax does not need to be
charged where no separate lease agreement or payment is designated separately
for the equipment?
I
am a CPA here in Salt Lake City, and have clients that are contemplating these
arrangements. I request your assistance
in obtaining documentation that clearly documents Utah State Tax Commission's
positions, policies, or regulations regarding these matters, so that I can
appropriately advise my clients.
As
these transactions are pending, your prompt attention regarding these matters
is appreciated. Feel free to call me if
you have questions regarding this letter at XXXXX.
Sincerely,
XXXXX
XXXXX
RE: Advisory Opinion: Application of sales tax to equipment leases
Dear
XXXXX,
We
have received your request for an advisory opinion regarding the application of
sales tax to equipment leases. We
address your questions in the order presented.
1. If your client owns equipment and leases
that equipment to someone else, the lease transaction is taxable and rent
payments must include sales tax. The
fact that your client paid sales tax when purchasing the equipment does not
change the taxable status of the lease transaction because the original
purchase and subsequent leases are two distinct transactions.
Your
client may be entitled to a refund of sales tax paid on the purchase of the
equipment if he bought the equipment specifically for the purpose of leasing it
to others in the regular course of business.
If, on the other hand, your client purchased the equipment for his own
use or for some other purpose, then later decided to lease it to someone else,
no refund is due.
If
you have additional questions concerning a refund, please discuss the details
of the purchase transaction and subsequent use of the equipment with a
representative of our Customer Service Division Refund Unit. A refund claim must be filed within three
years of the date of overpayment.
2. When a lease payment covers both rental of a
building and equipment, the Commission generally views the entire transaction
as a non-taxable rental of real estate.
If
you have other questions that we have not answered here, please feel free to
contact us again or to call the Technical Research Section of our Customer
Service Division at XXXXX.
For
the Commission,
Alice
Shearer
Commissioner