97-053
Response
October 7, 1997
REQUEST
LETTER
Dear
Ms. Rees,
I have just spoken with Jeff McNemar
in one of your office and he has suggested I write to you for an Advisory
Opinion.
We at NAME sell manufactured
homes. There are two separates
situations.
1. We
sell & manufacture homes that go into a trailer park. The customer is renting the space. We do the slab, sinking, hook-up of
electric, gas, water, etc., components, awnings & decks.
2. We
sell homes that goes on real property.
a. We deliver the home and set it on a
foundation. The customer who owns the
property does all the electric, plumbing, etc.
b. We sell the home deliver it, do the
foundation, electric improvements, plumbing hook-ups, garage, etc.
What are the formulas for taxes on
these situations.
Thank
you,
NAME
October
7, 1997
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion - Sales tax on sales of manufactured homes installed on real property.
Dear
NAME,
We have received your request for
sales tax guidance pertaining to your company’s sales of manufactured homes
installed in connection with real property in Utah. On the basis of your telephone conversation with Jeff McNemar of
the Auditing Division, we understand
that you sell manufactured homes and that you may also sell accessories or
other items used in conjunction with the home.
The purchaser may contract with you to install the home, but in some
cases the purchaser makes other
arrangements for installation. We
offer the following tax guidance:
The question of who is responsible
to pay sales tax on the items described in your letter depends upon whether the
item is converted to real property or remains tangible personal property after
affixture to real property. Utah
Administrative Rule R865-19S-58 (copy enclosed) explains that when a contractor
purchases construction materials and converts the materials to real property,
the contractor must pay sales tax at the time he purchases the materials. Therefore, you are liable to pay the sales
tax on your purchase of any item that you convert to real property.
Your
subsequent sale of such item to your customer is not taxable. With regard to items that you sell as
tangible personal property, you are required to collect sales tax from your
customers on these transactions.
When you sell and install a
manufactured home, you are considered a real property contractor under rule
R865-19S-58 if you install the manufactured home on real property so that it is
permanently anchored in compliance with state installation standards and
permanently attached to plumbing, electrical systems and other utilities. This is true without regard to the nature of
the foundation or slab that sits under the home or who owns the underlying real
property. As a real property
contractor, you are liable for the sales tax due on items that you purchase and
install in this manner.
When you sell a manufactured home
and the purchaser installs the home, you must collect sales tax on the
transaction from your customer for the home and any other items sold
separately, such as plumbing and electrical equipment that you may supply to
the customer. Delivery charges are part
of the taxable amount unless delivery is by common carrier and delivery takes
place after title passes to the purchaser.
Utah Administrative Rule R865-19S-71 (copy enclosed) outlines the
provisions concerning delivery charges.
Mr. McNemar has indicated to us that
you expressed concern about the application of the 45% partial sales tax
exemption available on the sale of new manufactured homes, so we address that
issue as follows:
In a transaction in which you are
considered a real property contractor, you are liable for sales tax calculated
on 55% of your purchase of the home from the manufacturer. We consider all items purchased from the
manufacturer as part of the manufactured home “package” to qualify for the
exemption. For instance, if the home
comes to you from the manufacturer with an awning, a swamp cooler, furniture
and appliances, those items qualify for the partial exemption. Other items that you purchase separately,
such as cement for the pad or landscaping materials are taxable at 100% of your
purchase price.
In a transaction in which you sell a
manufactured home as tangible personal property (the purchaser arranges
installation), the amount charged for the home as it arrived from the
manufacturer, plus the amounts charged for dealer “add-ons” that are attached
to and that become an integral part of the dwelling are eligible for
exemption. Items such as stand-alone
carports or sheds that are not attached and integral to the home are not
eligible for this exemption, and they must be taxed at 100% of their sales
price.
With regard to items that are not
part of the home, such as unattached garages, carports and sheds, the rules
pertaining to tax liability are the same.
If you purchase construction materials and convert them to real
property, you are liable for sales or use tax on your purchase of those
items. If the items remain tangible
personal property after affixture, you must collect sales tax from your
customer. These items do not qualify
for the partial exemption. (See Tax
Commission Publication 42, enclosed, for more information about the distinction
between real and tangible personal property.)
Please let us know if you have other
questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
^^