98-036
Response
July 1, 1998
REQUEST
LETTER
98-036
May
28, 1998
Jeff
McNemar
Sales
Tax Audit Manager
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, Utah 84134
RE: COMPANY A- Sales Tax License No. #####
Dear
Mr. McNemar:
As
you suggested during a phone conversation yesterday with NAME, we are writing
to
request
an Advisory Opinion letter regarding our client's request for a sales tax refund. Since we
spoke
with you, we have researched the facts of the situation, which should justify the claim for a refund
from the vendor. The facts, as we understand them, are as follows:
COMPANY
A (of CITY, Utah) purchased various tools and pieces of equipment from COMPANY
B (of CITY, STATE) during 1997, paying a total of $$$$$ in sales tax for the
purchased items. At the time of the
purchase, COMPANY A did not have an Exemption Certificate (see the enclosed
copy of the Certificate) since they had recently begun business in 1997.
COMPANY A now leases the tools and equipment to COMPANY C (of CITY, Utah), collecting and remitting the sales tax
received with the monthly lease payments from COMPANY C.
COMPANY
B now refuses to issue a refund, believing that a refund is not justified as
COMPANY A did not have an Exemption Certificate at the time of the sale. COMPANY B believes that they would be subjecting
themselves to a sales tax assessment and penalty if they were to issue a refund
to COMPANY B in light of the circumstances.
We
request that the Commissioners issue an Advisory Opinion disclosing that
COMPANY B is justified in issuing a sales tax refund for the sale of tools and
equipment that COMPANY A now leases to COMPANY C.
Thank
you for your help with this matter. If you have any questions concerning the
details of the
transaction
outlined above, please call NAME at #####.
Sincerely,
NAME
July
1, 1998
NAME
ADDRESS
CITY,
STATE ZIP
RE: Advisory
Opinion - Resale Exemption and Sales Tax Refund
Dear
NAME,
We have received your request for an
advisory opinion concerning purchases of equipment by COMPANY A on which sales
tax was paid. The equipment has since
been leased out to COMPANY C (“COMPANY C”) and sales tax is collected on the
leases by COMPANY A. COMPANY A now
wants to claim the purchase for resale exemption allowed under Utah Code Ann.
§59-12-104(27) on its original purchase of the equipment and receive a refund
of the sales tax it paid to its vendors.
We advise as follows.
According to the facts in your
letter and those obtained by telephone from NAME in your office, COMPANY A was
created in July, 1997, to serve as a leasing company to rent land and lease
equipment mainly to COMPANY A. COMPANY A’s first purchase of equipment occurred
on October 21, 1997. The vendor,
COMPANY B, delivered the equipment to and billed COMPANY C for the purchase.
COMPANY A paid the bill, which included sales tax, and is the company that will
capitalize the equipment for federal income tax purposes. COMPANY A applied for
its Utah sales tax license on October 30, 1997. The lease with COMPANY C took effect in January, 1998 and COMPANY
C does pay sales tax on its lease payments to COMPANY A.
Based on the facts presented, we
find that the property was in the possession of COMPANY C for at least two
months prior to the lease being signed, during which time NAME indicates the
property was not in use as COMPANY C had not yet opened. The lease was signed near the time the
dealership opened. Even though the
property was in the possession of the lessee some time prior to the lease being
signed, these particular circumstances suggest that COMPANY A was in the lease
business at the time it purchased the equipment and did, at that time, have the
intention to resell it (or lease it, as in this case). For these reasons, we find that COMPANY A
may receive the purchase for resale exemption and a refund of the sales tax
paid on this equipment.
To receive a refund of the sales
tax, COMPANY A will need to present an exemption certificate to its
vendor. The vendor should refund the
sales tax to COMPANY A, then apply the refund as a credit on its next sales tax
report to the Tax Commission. If the
vendor does not have sales tax liability on which to apply the credit, it may
apply to the Tax Commission for a refund of the remitted sales tax.
Please contact us if you have any other questions.
For
the Commission,
Joe
B. Pacheco
Commissioner
^^