98-041
Response
June 10, 1998
REQUEST
LETTER
May
12, 1998
Re: Advisory Opinion Request
Dear
Commissioners:
COMPANY
A is working toward compliance of the affordable housing mandate implemented by
the
State of Utah (UCA 10-9-307). In order to
reduce the cost of housing to the
purchaser
COMPANY
A is doing the following:
1. Waiving
the utility hookup fees.
2. Waiving
the city impact fees.
3. Waiving
the building permit cost.
4. Building
the homes on city owned property.
5. XXXXX
classes to build the affordable homes.
Thereby, eliminating labor costs and providing an improved educational
opportunity for the students in all construction trades.
According
to Utah Code Annotated. Section 59-l2-l04..."the purchase of construction
materials
are exempt from sales tax if they are installed or converted to real property by
employees
of the state, its institutions or its political subdivisions."
We
would like to have your opinion on if the state will share in the reduction or
costs by
exempting
the sales tax on the purchase or construction materials. Thank you for your
consideration. I look forward to your reply.
Sincerely,
NAME
June
10, 1998
NAME
ADDRESS
CITY,
STATE ZIP
RE: Advisory
Opinion - Sales Tax Exemption for Construction Materials
Dear
NAME,
We have received your request for a
sales tax exemption for construction materials used to build moderate income
housing in COMPANY A. As required under
Utah Code Ann. §10-9-307, COMPANY A is adopting a plan for moderate income
housing. Further, COMPANY A is
following the statute’s suggestion to waive various municipal fees for homes
built under this plan.
Whether the sales tax on the
construction materials is exempt must be determined by analyzing Utah Code Ann.
§59-12-104(3), the statute that does exempt these materials under certain
circumstances. As the Commission is
charged with the duty to administer the tax laws of Utah, it must enforce the
laws as written by the Legislature. The
Commission may not exempt a tax liability to encourage a beneficial cause or
even to promote another state-required program unless the Legislature has
itself enacted legislation allowing the exemption.
Part (b) of Section 104(3) provides
that to purchase construction materials tax free, the state or its political
subdivision must not only make the purchase directly, it must also use its own
employees to convert the materials to real property. If the construction materials used to build moderate income
housing in COMPANY A meet both these criteria, the materials are exempt from
taxation. Should either of these
criteria not be met, state law requires that sales tax be collected on the
purchase of the materials.
Please contact us if you have any other
questions.
For
the Commission,
Joe
B. Pacheco
Commissioner
^^