96-099
Response
June 26, 1996
Request
Dear
XXXXX:
I
spoke with a gentleman at your office yesterday who advised me that you would
send a letter to our client in XXXXX, Illinois, explaining why they were
required to pay sales tax in Utah unless they had a state of Utah tax exempt
certificate.
I
am enclosing a correspondence from us regarding the sales tax and also their
reply indicating they believe their Illinois exemption certificate covers all
states except California and Massachusetts.
Please
send this information to our client listed below, with a copy to us.
XXXXX
Call
if you have any questions or if you need additional information.
Yours Truly,
XXXXX
XXXXX
Advisory
Opinion - Sales tax on labor to install cubicals in a commercial office.
Dear
XXXXX
We have received a request from
XXXXX for an advisory opinion regarding the sales tax due on the installation
of cubicals and other office furniture in a Utah facility. We begin by confirming our understanding of
the nature of the transaction.
XXXXX entered into a contract to
install cubicals, files and other office furniture in a building in Utah. XXXXX, in turn, sub-contracted the supply,
delivery and installation of the items to XXXXX, a Utah company. XXXXX claims a resale exemption on the
cubical panels and other furnishings, but XXXXX charged XXXXX sales tax on the
labor to do the installation. XXXXX
challenges the charge for sales tax on the labor. On the basis of these facts, we offer the following guidance:
The taxable status of labor to install
an item of tangible personal property depends upon whether the item is
installed in connection with real property.
Under Utah Administrative Rule R865-19S-51, charges to install personal
property in connection with other personal property are taxable, but charges to
install tangible personal in connection with real property are not. Cubicals generally remain tangible personal
property upon installation, and they may be installed in a manner that would
disqualify them from the exemption on labor.
However, if the cubicals are affixed to real property, charges for
installation is non-taxable if separately stated. We do not have enough information about this particular
installation to make this determination, but apparently XXXXX felt that the
manner of affixation was insufficient to avoid sales tax. Feel free to contact us with a more detailed
description so we can offer you advice on that matter. For purposes of this response, we assume
that the labor to install is taxable, and we move to the issue of liability for
the tax.
Under Utah Administrative Rule
R865-19S-51, the amount charged for fabrication or installation which is part
of the process of creating a finished article of tangible personal property
must be included in the amount upon which tax is collected. The entire amount charged to the customer
for cubical panels, desk panels, filing cabinets, and all other materials and
supplies is subject to sales tax. In
this case, the taxable sale seems to be the transaction between XXXXX and its final
customer. The transaction between XXXXX
and XXXXX is not taxable.
Because XXXXX is the vendor in this
transaction, it is responsible for collecting and remitting the sales tax if it
has nexus with Utah. For purposes of
sales tax, an out-of-state business has nexus in this state if (1) has an
office, distribution center or other place of business here; (2) maintains a
stock of goods here; (3) regularly engages in the delivery of property in Utah
other than by common carrier or U.S. mail; or (4) regularly engages in leasing
or servicing property here. If this
transaction was XXXXX only Utah transaction, arguably there is no nexus in
Utah. In that case, XXXXX Utah customer
is required to accrue and remit the sales tax directly to the Tax Commission. However, if this Utah transaction is not an
isolated case, XXXXX does have nexus and it must have a Utah sales tax license
and collect and remit Utah sales tax.
When XXXXX purchases items tax free
for resale, it must complete a sales tax exemption certificate for the vendor’s
tax records. With regard to the
Illinois exemption certificate, it may be inappropriate for use in conjunction
with Utah sales. We have designed a form
that specifically meets the vendor’s record keeping requirements. I am enclosing a Utah exemption certificate
form for your use. Feel free to copy
the form and use it for your Utah transactions. If the Illinois exemption certificate contains the same
information, it is acceptable in Utah.
If you have questions about the sales
tax license or sales tax reporting requirements, please contract our Customer
Service Division at XXXXX. If you have
questions about this opinion, contact our Tax Policy Analyst, XXXXX, at XXXXX.
For
the Commission,
Alice
Shearer,
Commissioner