96-109
Response July 30, 1996
Request
XXXXX
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, Ut 84134
Dear
XXXXX
We
are manufactures of vacuum cleaners here in Salt Lake City and have a Sales and
Use tax question we need an opinion on and were told to write to you for it. We
have purchased molds through a California firm to make a new vacuum that
penetrates a market previously untapped by our company. We took sales tax
exemption on the molds based on the manufacturing facility expanding operations
clause in the Utah Sales Tax Code. While we own the molds, the company doing
our molding is also in California. We ran a couple of prototypes and discovered
we need to make some modifications. The mold maker sent us a bill including
California use tax charges. My question is, are we subject to California or
Utah tax regulations for this invoice?
Please
Fax me your opinion to XXXXX or send it to the address above. We appreciate
your help in this matter.
Sincerely,
XXXXX
XXXXX
Re: Advisory Opinion - Taxability of
labor performed on out of state equipment.
Dear
XXXXX
We received
your letter requesting an advisory opinion on the taxability of labor performed
on out of state equipment. The
following information should answer your request.
From
your request letter and further information you provided over the phone, the Commission
understands that you have purchased molds from a California company. These molds remained in California, and a
second California company uses them to produce parts for your Utah
manufacturing facility. Apparently,
after a prototype run, the mold making company made necessary modifications to
the molds and sent you a bill for the labor.
The bill included California use tax charges.
Based
on this information, Utah law does not require your company to pay Utah sales
tax for the labor performed on the molds.
For the transaction in question, a California company performed the
labor in California. In order for Utah
to levy a sales tax on the equipment modifications, the transaction would have
to be a Utah sale.
The
original purchase of the molds and the modifications to the molds took place in
California. From the information your
provided us, it appears that no part of these transactions took place in
Utah. Because the purchase and
subsequent modifications of the molds constitute California transactions, the
Utah manufacturing exemption does not apply.
If California imposes a tax on these types of transactions, you cannot
avoid the California tax by claiming the Utah exemption.
According
to our Auditing division, however, California does have a manufacturing
equipment exemption. Obviously, we are
not authorized to rule or interpret California tax law. We suggest that you direct your sales tax
questions on these transactions to the Sales and Use Tax Department of
California. For your convenience, the
address of the California State Board of Equalization is XXXXX. The phone number for the Sales and Use Tax
Department is XXXXX.
We
hope this information satisfies your request.
If you have further questions, please contact us again.
For the Commission,
Alice
Shearer,
Commissioner