98-049
Response
July 28, 1998
REQUEST
LETTER
JULY 1, 1998
DEAR MR. MCNAMARA,
WE ARE REQUESTING A WRITTEN
OPINION FROM THE STATE OF UTAH
REGARDING BRUNELL HARDNESS TESTING OF DRILL PIPE AND DRILL COLLARS.
THE PROCEDURE FOR THE BRUNELL CHECK IS
AS FOLLOWS. A SMALL AREA ON THE PIPE IS GROUND CLEAN. A HARDNESS TESTER WHICH STAMPS A BALL DOWN INTO THE PIPE LEAVING
AN INDENTATION IS THEN APPLIED. USING A MICROSCOPE, THE DIAMETER OF THE
INDENTATION IS MEASURED WHICH INDICATES THE HARDNESS OF THE PIPE. THE RESULTS FROM THE TEST DETERMINE WHETHER THE
DRILL PIPE OR COLLARS ARE FEASIBLE TO CONTINUE USING.
SINCE THIS TEST DOES NOT
ALTER, REPAIR OR MAINTAIN THE EQUIPMENT WE FEEL THAT IT SHOULD NOT BE SUBJECT
TO UTAH SALES TAX.
IF YOU HAVE ANY ADDITIONAL
QUESTIONS, PLEASE CONTACT ME AT #####.
SINCERELY,
NAME
NAME
ADDRESS
CITY, STATE ZIP
RE: Advisory
Opinion - Are charges for Brunell hardness testing of drill equipment subject
to sales tax?
Dear NAME,
We
have received your request for an advisory opinion as to whether sales tax is due
on charges for Brunell hardness testing of drill pipes and drill collars. Generally, charges for services are not
subject to sales tax unless those services are for the repair or renovation of
tangible personal property or for certain installations of personal
property. From your description of the
Brunell hardness test, it does not appear that the drill equipment is repaired,
renovated, or installed when this test is performed. Thus, based on the facts you have presented, we find that the
charges for the test are not subject to sales tax.
However,
let us point out that services that are part of a sale or repair are taxable
under Utah Admin. Code R865-19S-27.
Thus, should any repair or renovation be performed by your company once
the test has been performed, then the entire charge is taxable, both for the
test and for the repair or renovation.
This is true even if the charges for the test and the repair or
renovation are stated separately on the invoice.
Please
contact us if you have any other questions.
For
the Commission,
Joe
B. Pacheco, CPA
Commissioner
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