98-087

Response April 20, 1999

REQUEST LETTER

WITHDRAWN BY COMMISSION, NOVEMBER 16, 2004

November 27, 1998

Attention: Irene Rees

RE: Use Tax Issues

Please provide us with an advisory opinion. We internally line gasoline tanks in the state on Utah. We are a STATE business; our home office is in CITY STATE. Our epoxy is the only material we did not purchase in Utah; it was delivered from the state of STATE.

Do we owe “use taxes” on the material?

If so, if the material is shipped to Salt Lake City and the end use is in STATE or another state do we still owe “use taxes” on that material?

Do we owe sales tax on the work provided to the Utah businesses we provided our services to?

If you determine that we have a tax liability to your state, please include any relevant forms, so that we can meet our responsibilities to your Tax Commission.

NAME

POSITION

RESPONSE LETTER

April 20, 1999

COMPANY

ADDRESS

RE: Advisory Opinion - Sales and Use Liability for Services to Line Gasoline Tanks

Dear NAME,

We have received your request for an advisory opinion concerning the Utah sales and use tax liabilities that are incurred by COMPANY due to its business of lining gasoline tanks in Utah. The Company has sales and use tax nexus with Utah, so it will need to submit Utah sales and use tax returns. In order to know which is the appropriate sales and use tax return, the Company needs to register with the state on the enclosed Form TC-69 (Utah State Business and Tax Registration Form). Once you have completed and returned this form, the Commission will send you the appropriate sales and use tax return to complete.

Your sales and use tax consequences will depend upon whether you line underground gasoline tanks, which the Commission has determined to be real property, or above-ground gasoline tanks, which are usually considered personal property. The tax liability on services performed on and products added to each is different. Let us address each separately.

Underground Gasoline Tanks. These tanks, once installed, are considered real property. Converting personal property to real property and renovating real property are nontaxable transactions. Thus, lining an underground gasoline tank, after it is installed underground, is a nontaxable transaction, and the Company should not charge its clients sales tax on these transactions. However, under this circumstance, the Company itself is considered to be the final consumer of any personal property, including the epoxy, that it uses to line these tanks. Accordingly, the Company should pay sales or use tax on the epoxy that is uses to line the tanks.

If your epoxy supplier in STATE is registered with Utah to collect sales and use tax, it should collect and remit any tax you owe on the epoxy. If not, the Company must calculate the use tax and remit it on its sales and use tax return. The use tax is due on all personal property stored, used, or consumed in Utah. Thus, for any epoxy delivered into Utah from your Florida supplier, use tax is due on that epoxy, even if it is later used on a job in STATE or another state.

When epoxy on which Utah use tax has been paid is used in a state other than Utah, the other state may allow a credit from its sales tax for the amount of use tax paid to Utah. Should the other state not allow credit for the tax paid to Utah, Utah Admin. Code R865-21U-12 provides that the purchaser may request a refund of the Utah tax previously paid.

Above-ground Tanks. These tanks are usually considered personal property unless they are so attached to the realty that they become part of it. Charges to install personal property in connection with other personal property or to renovate personal property are taxable. See Union Pacific R.R. v. Auditing Division, 842 P.2d 876 (1992). Thus, lining a tank that is personal property is a taxable transaction. This rule applies to any tank that is tangible personal property at the time the lining is applied, even if that tank may subsequently become real property. On these transactions, the Company would need to collect sales tax from its customers on the total charge for materials and labor and remit it on its sales and use tax return. As it is the customer who is considered the final consumer of the epoxy under these circumstances, the Company may purchase the epoxy tax-free using the resale exemption, whether the epoxy is used in Utah or another state.

If your STATE supplier is registered with Utah for sales tax purposes, you must submit an exemption certificate (copy enclosed) to your supplier at the time you purchase the epoxy. By doing so, the supplier will not charge you tax on the epoxy. If the supplier is not registered with Utah, it will not collect tax from you anyway. In either case, you need not report any use tax on your sales and use tax return when the epoxy is used to line personal property.

Please contact us if you have any other questions.

For the Commission,

R. Bruce Johnson

Commissioner

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