95-062
Response September 29, 1995
Request
XXXXX
Utah State Tax Commission
210 No. 1950 W.
Salt Lake City, Utah 84134
Dear XXXXX:
XXXXX District would like to get an advisory opinion relating to the
exemption from sales tax for construction materials purchased after January 1,
1996.
According to the way we interpret the law (HB. 274) as written material
purchased after January 1, 1996, on behalf of the school district and converted
into real property which is owned by the school district, would be exempt from
sales tax. We believe this should apply
to materials purchased after January 1, 1996, even if a bid for the
construction job was finalized prior to January 1, 1996. We recognize that the State Tax Commission
may have their own interpretation, and we want to be in compliance with that
guideline.
We are preparing bid documents at this time, and intend to specify in
those documents that materials purchased and delivered after January 1, 1996
should be exempt from sales tax.
Because of the large dollar amount involved, we would greatly appreciate
timely advise on this issue.
If there is any further information we need to supply, please
call. Thanks for your help!
Sincerely,
XXXXX
XXXXX
RE: Advisory Opinion--Application of sales tax
exemption for construction materials purchased by or on behalf of public
schools.
Dear
XXXXX,
We
have received your request for an advisory opinion regarding the sales tax
exemption on construction materials which takes effect on January 1, 1996. We offer the following guidelines.
Construction
materials purchased on or before 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.
Ordinarily,
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 other wise.
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 explicit 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 . . . .
XXXXX
District can control the moment that title passes by explicitly stating its
intent regarding passage of 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.
Please
let us know if we can be of further assistance.
For
the Commission,
Alice
Shearer
Commissioner