DAR File No. 27828

Tax Commission, Auditing

R865-19S-68

Premiums, Gifts, Rebates, and Coupons Pursuant to Utah Code Ann. Sections 59-12-102 and 59-12-103

NOTICE OF PROPOSED RULE

DAR File No.: 27828
Filed: 04/15/2005, 02:33
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

S.B. 147 (2003) and S.B. 127 (2005) amended Section 59-12-102 to provide that most manufacturer rebates are included in the purchase price and, accordingly, included in the tax base of a taxable transaction; and Section 59-12-104 to exempt manufacturer rebates on the purchase of a new motor vehicle. (DAR NOTE: S.B. 147 is found at UT L 2003 Ch 312, and was effective 07/01/2004. S.B. 127 is found at UT L 2005 Ch 158, and will be effective 07/01/2005.)

Summary of the rule or change:

The proposed amendment removes language that is in conflict with language codified by S.B. 147 (2003) and S.B. 127 (2005); and makes technical changes.

State statutory or constitutional authorization for this rule:

Sections 59-12-102 and 59-12-103

Anticipated cost or savings to:

the state budget:

None--Any impacts would have been taken into account in S.B. 147 (2003) and S.B. 127 (2005).

local governments:

None--Any impacts would have been taken into account in S.B. 147 (2003) and S.B. 127 (2005).

other persons:

None--Any impacts would have been taken into account in S.B. 147 (2003) and S.B. 127 (2005).

Compliance costs for affected persons:

None--The statutory changes mirror the current practice.

Comments by the department head on the fiscal impact the rule may have on businesses:

None--The language placed in statute matches current practices. Pam Hendrickson, Commission Chair

The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:

Direct questions regarding this rule to:

Sheri McFall at the above address, by phone at 801-297-3901, by FAX at 801-297-3919, or by Internet E-mail at sherimcfall@utah.gov

Interested persons may present their views on this rule by submitting written comments to the address above no later than 5:00 p.m. on:

06/01/2005

This rule may become effective on:

06/02/2005

Authorized by:

Pam Hendrickson, Commissioner

RULE TEXT

R865. Tax Commission, Auditing.

R865-19S. Sales and Use Tax.

R865-19S-68. Premiums, Gifts, Rebates, and Coupons Pursuant to Utah Code Ann. Sections 59-12-102 and 59-12-103.

A. Donors [of articles]that give away items of tangible personal property[, which are given away] as premiums or otherwise[,] are regarded as the users or consumers [thereof]of those items and the sale to [them]the donor is a taxable sale. Exceptions to this treatment are items of tangible personal property donated to or provided for use by exempt organizations [who]that would qualify for exemption under R865-19S-43 or R865-19S-54 if a sale of such items were made to them. An item given away as a sales incentive is exempt to the donor if the sale of that item would have been exempt. An example is prescribed medicine given away by a drug manufacturer.

B. When a retailer making a retail sale of tangible personal property [which]that is subject to tax gives a premium together with the tangible personal property sold, the transaction is regarded as a sale of both articles to the purchaser, provided the delivery of [such]the premium is certain and does not depend upon chance.

C. Where a retailer is engaged in selling tangible personal property [which]that is not subject to tax and furnishes a premium with the property sold, the retailer is the consumer of the premium furnished.

D. If a retailer accepts a coupon for part or total payment for a taxable product and is reimbursed by a manufacturer or another party, the total sales value, including the coupon amount, is subject to sales tax.

E. A coupon for which no reimbursement is received is considered to be a discount and the taxable amount is the net amount paid by the customer after deducting the value of the coupon.

[F. Manufacturer rebates on sales of tangible personal property are considered as a discount and the taxable amount is the net amount paid by the customer after deducting the rebate. If the manufacturer's rebate is certain at the time of sale, tax should be charged only on the net amount of the sale; otherwise, tax is charged on the total before the rebate credit, and then later refunded to the customer when proof of rebate is given to the dealer for his file.

1. If the rebate is applied as part of the down payment, it must be segregated on the buyer's order, invoice, or other sales document from any cash down payment. Since the tax base for collection is reduced by the amount of the rebate, the rebate must be shown separately and identified for sales tax computation and subsequent audit verification. Care must be taken to avoid a double deduction if the gross sales price on the sales document has already been reduced by the rebate amount.

G.]F. If a retailer agrees to furnish a free item in conjunction with the sale of an item, the sales tax applies only to the net amount due. If sales tax is computed on both items and only the sales value of the free item is deducted from the bill, excess collection of sales tax results. The vendor is then required to follow the procedure outlined in R865-19S-16 and remit any excess sales tax collected.

[H.]G. Any coupon with a fixed price limit must be deducted from the total bill and sales tax computed on the difference. For example, if a coupon is redeemed for two $6 meals, but the value of the free meal is limited to $5, the $12 is rung up and the $5 deducted, resulting in a taxable sale of $7.

KEY: charities, tax exemptions, religious activities, sales tax

[December 21, 2004]2005

Notice of Continuation April 5, 2002

59-12-102

59-12-103

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Sheri McFall at the above address, by phone at 801-297-3901, by FAX at 801-297-3919, or by Internet E-mail at sherimcfall@utah.gov

For questions about the rulemaking process, please contact the Division of Administrative Rules (801-538-3764). Please Note: The Division of Administrative Rules is NOT able to answer questions about the content or application of these administrative rules.