97-015
Request
February
20, 1997
RE:
Tax Rate for Salt Lake County and Utah State
Joe,
Please offer a written response to the following questions:
1. Is the current Utah
State rate 4.875/%?
2 Are there any existing proposals to
raise the State rate within the next four years? If so, what is the proposed
percentage of increase?
3. Prior to 1-1-97, was the combined Salt
Lake County and State rate 6.125%?
4. Effective 1/1/97, was the combined Salt
Lake County and State rate 6.225%?
5. Does the fine State of Utah have a
provision in the Sales/Use Tax law/code that, once a construction contract is
signed, freezes the State and local option taxes for the duration of the
contract? (such as a "Prior Contracts Agreement"?).
6. Considering question five above, if a
contractor builds a project (improves real property/new construction) and
"Maintains" the project for ten years, is there a difference in the
contractor’s Sales/Use Tax liability if the contract to improve real property
and the maintenance contract are combined or separated?
Thanks
again, for asking me to review the States new proposed handout.
Please
advise ASAP.
Regards,
NAME
March
10, 1997
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion - Sales tax rate applicable to future performance on a contract.
Dear
NAME,
We have received your request for information
concerning sales tax rates. We offer
the following guidance:
1. The current statewide rate in Utah is
4.875 percent. The current combined
state and local rate is 5.875 percent, except in areas where a mass transit tax
is imposed. The combined state, local
and mass transit rate for areas that have imposed the mass transit rate is
6.125 percent.
2. Because tax rates are controlled by the
legislature and local legislative bodies, we cannot speculate as to tax rate
increases over the next four years. For
instance, this year the state legislature passed some bills creating new county
option taxes. If the governor signs the
bills into law, and Salt Lake County acts to impose these additional taxes, the
Salt Lake County tax rate will increase.
3. Prior to January 1, 1997, the combined
rate in Salt Lake County was 6.125 percent.
4. Beginning January 1, 1997, the combined
rate in Salt Lake County was increased to 6.225. A sales tax rate chart and publication 25 explaining sales and
use tax are enclosed for your information.
5. Utah does not have a provision to
freeze tax rates for the duration of the contract. The applicable sales tax rate is the rate in effect when the
sales transaction is completed, not the rate in effect when the contract for
sale is signed. A sale is completed
when title to the property passes. Utah
Administrative Rule R865-19S-31 states, in relevant part:
Ordinarily, the time and place of a sale are determined by the contract
of sale between the seller and buyer.
The 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 of sale provides otherwise.
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.
Section 70A-2-401 states in part:
(1)
. . . title to goods passes from the seller to the buyer in any manner and on
any conditions explicitly 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. . . .
Because you are considered the final
consumer of materials used to construct, repair or maintain real property, the
taxable event occurs when you purchase the items. Under the provisions cited above, the purchase takes place when
an item is delivered, unless you and your suppliers have contractually
agreed otherwise.
6. Because your current contract does not
freeze the tax rate that will apply to your future transactions, it makes no
difference to your tax liability if the maintenance contract is combined with
the original contract.
As you draft long term contracts
with your suppliers and customers, keep two things in mind. First, the time of sale can be controlled to
some degree by the terms of your contract.
Second, tax rates are always subject to change. You can protect yourself against unforeseen
tax rate changes by including provisions for adjustments in your contracts.
Thank you for taking time to review
our draft publication for real property contractors. The publication should be in print soon.
For
the Commission,
Joe
B. Pacheco,
Commissioner