98-007
Response February 10, 1998
January
13, 1998
COMPANY
A manufactures custom cabinets in Utah which are installed in homes in the
State of STATE. We do not pay sales tax
on the materials incorporated in the cabinets because many of the materials are
purchased outside the State of Utah.
The
State of STATE is taking the stand that the use tax on the materials
incorporated in the cabinets installed in STATE are Payable to the State of
STATE.
We
need to know if the State of Utah will allow credit for the use tax on these
materials if we pay it to the State of STATE.
Sincerely,
NAME
February
10, 1998
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion - Credit for use tax paid in STATE
Dear
NAME,
We have received your request for
sales tax guidance pertaining to your company’s sales of cabinets which are
installed and converted to real property in STATE. As we understand STATES’s practice, that state allows a credit
for sales tax paid in another state, but does not apply the credit to use tax
paid in another state. We offer the
following guidance:
Section 59-12-104 (33) of the Utah
Code creates a limited sales tax exemption for sales of tangible personal
property to persons within this state if the property is subsequently shipped
outside of Utah and incorporated into real property outside of Utah pursuant to
a contract. However, the exemption is
limited to the extent that the other state imposes a sales, use, gross receipts
or other similar transaction tax on the property, then allows a credit against
those taxes for taxes imposed in Utah.
To summarize the exemption, no Utah tax is due on sales unless:
1. the sales are also taxable in the state
of destination, and
2. the destination state allows a credit
for taxes paid in Utah.
Your transactions meet the first
condition listed above. That is, the
transactions are taxable in STATE. To
the extent that your company purchases materials from Utah vendors who collect
Utah sales tax, your transactions also meet the second condition because STATE
will allow a credit for sales tax paid in Utah. As to the use tax paid on items purchased outside of Utah, it is
our understanding that STATE will not allow a use tax credit at all. The use tax paid in Utah, then, fails to
meet condition 2 outlined above.
Therefore, no use tax is due in Utah.
You may use a Utah exemption certificate to make these purchases tax
free.
Please let us know if you have other
questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
^^