96-026

Response February 2, 1996

Request

January 22, 1996

Dear Tax Commissioners:

Please provide us with a written opinion on our particular situation as follows:

We are a Government Services Contractor, contracted to repair and maintain more than 500 heavy vehicles and equipment items (forklifts, snow plows, fire trucks, cranes, etc.) at XXXXX Army Depot, Utah. Our contract (XXXXX) began XXXXX and will expire XXXXX.

We respectfully request your opinion and decision to provide us with a Utah state Tax Exempt Status/Number that we may use when purchasing repair parts and materials from local vendors/suppliers.

Our reasons for requesting sales tax exemption are:

1. We are an U.S. Army Contractor situated on a U.S. Army Base in Utah.

2. We maintain and repair heavy vehicles and equipment items that are owned, operated, managed, and controlled by the U.S. Army.

3. We are utilizing machinery and facilities provided by the U.S. Army to perform the repair and maintenance.

4. We will be purchasing parts and materials that will be used exclusively to repair and maintain U. S. Army vehicles and equipment.

Should you require any additional information, or if I can be of assistance, please call me at my above listed phone number.

Sincerely,

XXXXX

February 2, 1996

XXXXX

RE: Advisory Opinion - Sales tax on repair parts and service for Army vehicles.

Dear XXXXX,

We have received your request for an advisory opinion regarding the application of sales tax to your purchases of parts and materials used to repair U. S. Army vehicles. We find as follows:

Purchases by the United States Government are exempt from sales tax, but purchases by government contractors or subcontractors are not. A limited exception to this rule applies to purchases of certain equipment used to support the aerospace or electronics industries, but that exception is not pertinent here.

If the contractor purchases parts or materials for use in performing a government contract, the contractor is considered the final consumer of the item, even if title eventually vests in the government. Because Utah law imposes tax on the sale of tangible personal property to the final consumer, you must pay sales tax on your purchases. To avoid this outcome, the Army could purchase the parts directly from the vendor, then contract separately with your company to perform repair work using their parts.

Please let us know if you have any other questions.

For the Commission,

Alice Shearer

Commissioner