97-056
Response
September 26, 1997
August
18, 1997
RE: Request for Advisory Opinion
Dear
Chairman Oveson:
Enclosed
is a Request for Advisory Opinion ("the Request") which we are
submitting on behalf of our client to whom we will refer to as XYZ, Inc.
("XYZ"). XYZ is an importer
and distributor of motor vehicles. XYZ is planning to offer selected
prospective customers a free test drive of their vehicles for a period not to
exceed twelve months with no obligation to lease or
buy
at the end of the period. In order to ensure that XYZ meets its compliance responsibilities,
the Company is seeking a determination which
would outline the State's position regarding sales/use tax.
Please
note, XYZ reserves the right to file this Request on a "no-name
basis". Accordingly, we hereby request that this Request be issued in the
name of COMPANY A. In the event a favorable conclusion has been reached, XYZ
reserves the right to file an identical Request under the corporate name.
I
previously submitted a written request dated June 18, 1997. Please consider this request as an addendum
to our original request.
Once
you have had an opportunity to thoroughly review the Request, please prepare a
written response to the issues addressed herein and send it to my attention. If
you have any questions or require additional information, please call me at
#####.
Very
truly yours,
NAME
*Additional
Information contained in the file
September
26, 1997
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion: Application of sales tax on vehicles offered to customers for trial
use.
Dear
NAME,
We have received your request for an
opinion as to the application of sales tax to vehicles offered as demonstrators
to potential buyers. Specifically, the
company proposes to offer vehicles to drivers in this state for a specific
period. At the end of the period, the
potential buyer has the option to purchase the vehicle or return it. The potential buyer is not required to pay
for normal use of the vehicle, but may be liable for payment for excessive wear
or damage during the trial period. You
have asked whether there is a sales tax liability associated with this kind of
transaction.
Utah Administrative Rule R865-19S-82
(copy enclosed) states that when a vehicle is drawn from inventory for use by
persons other than sales personnel, a taxable transaction has occurred. Although the rule does not contemplate a
transaction in the nature that you have described, it offers a useful formula
for determining the fair lease value of the vehicle. The fair lease value is the applicable tax base, and that amount
is subject to sales and use tax. Your
client, as the consumer, is liable for the tax
Please let us know if you have other
questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
^^