98-012
Response February 6, 1998
January
23, 1998
Dear
Ms Reese,
As
per our phone conversation today, I have attached a copy of the work description for COMPANY A. They
would like to have a written
determination on whether the work they perform is subject to Utah State
sales tax.
Please
contact NAME at ##### if you have any questions. Thank you for your consideration.
Sincerely,
NAME
February
6, 1998
NAME
ADDRESS
CITY,
STATE ZIP
RE: Sales tax liability for services performed
on nuclear medical equipment
Dear
NAME,
We have received your request asking
if sales tax liability is incurred by COMPANY A (“COMPANY A”), for services it
performs on equipment that has been installed in hospitals. In the memorandum forwarded to us from
NAME, you describe these services as “work on nuclear medicine equipment.” While the specific nature of this work is
not described, we will assume that the services provided are either for repairs
or renovation.
Utah Code Ann. §59-12-103(1)(g)
imposes sales tax on services for repairs or renovations of tangible personal
property. Utah Administrative Code
R865-19S-78(B)(2) further provides that charges for labor to service, repair,
or renovate equipment that is attached to real property so as to be considered
real property are not subject to sales tax.
To be considered part of the real property, the equipment must be
permanently attached. Thus, if the nuclear medicine equipment is
considered permanently attached to the real property, sales tax is not due on
repair or renovation services provided by COMPANY A.
What constitutes permanent
attachment? Rule 865-19S-78(B)(2) also
provides that mere physical attachment is not enough to indicate permanent
attachment. Instead, the attachment
must be essential to the operation and use of the equipment, with the manner of
the attachment suggesting that the equipment will remain affixed in the same
place over its useful life. In
addition, one may conclude that permanent attachment exists if removal of the equipment would cause it
substantial damage or require substantial alteration or repair of the structure
to which it is affixed.
From the memorandum you provided, we
learn that the nuclear medicine equipment at issue is anchored to a
specially-poured, self-leveling pad in the hospital and weighs between 3500
pounds and 8000 pounds. While the rule
states that mere physical attachment does not by itself indicate permanent
attachment, it does appear that tearing out the specially-poured floor pads at
the hospital would require substantial alteration of or repair to the hospital
should the equipment be removed. The
weight of the equipment and the nature of its use, along with its being
anchored in place, would all suggest that it will remain in the hospital over
its useful life. As the equipment would
appear to satisfy the permanent attachment criteria, repair or renovation
services performed on it would not be taxable because it is now considered part
of the real property.
Please contact us if you have any
other questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
^^