DAR File No. 28183

Tax Commission, Auditing

R865-19S-78

Charges for Labor to Repair or Renovate Tangible Personal Property Pursuant to Utah Code Ann. Section 59-12-103

NOTICE OF PROPOSED RULE

DAR File No.: 28183
Filed: 08/30/2005, 12:26
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

A recent amendment clarified a term recently added by S.B. 127 (2005) in Section 59-12-102, "permanently attached to real property". Based on public comment, that clarification is further clarified. (DAR NOTE: S.B. 127 (2005) is found at UT L 2005 Ch 158, and was effective 07/01/2005.)

Summary of the rule or change:

The proposed amendment makes clear that attachment to a utility supply pipeline may not be used to determine whether tangible personal property is permanently attached to real property; while attachment to a pipeline that is an integral part of the operations of an oil or gas field may be used to determine whether tangible personal property is permanently attached to real property.

State statutory or constitutional authorization for this rule:

Section 59-12-103

Anticipated cost or savings to:

the state budget:

None--The substance of the law subsequent to S.B. 127 (2005) remains the same as does the practice.

local governments:

None--The substance of the law subsequent to S.B. 127 (2005) remains the same as does the practice.

other persons:

None--The substance of the law subsequent to S.B. 127 (2005) remains the same as does the practice.

Compliance costs for affected persons:

None--Recent statutory changes and this proposed amendment continue the current practice.

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

There will be no fiscal impact to businesses as a result of this rule change. 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:

Cheryl Lee at the above address, by phone at 801-297-3900, by FAX at 801-297-3919, or by Internet E-mail at clee@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:

10/17/2005

This rule may become effective on:

10/18/2005

Authorized by:

Pam Hendrickson, Commission Chair

RULE TEXT

R865. Tax Commission, Auditing.

R865-19S. Sales and Use Tax.

R865-19S-78. Charges for Labor to Repair or Renovate Tangible Personal Property Pursuant to Utah Code Ann. Section 59-12-103.

[A.](1)(a) [For]Except as provided in Subsection (1)(b), for purposes of applying the definition of "permanently attached to real property" under Section 59-12-102, the determination of whether the attachment of an item of tangible personal property to real property suggests that the tangible personal property will remain attached to the real property in the same place over the useful life of the tangible personal property shall be made without regard to the tangible personal property's attachment to a line that supplies water, electricity, gas, telephone, cable, or other similar services.

(b) Notwithstanding Subsection (1)(a), tangible personal property in an oil or gas field is permanently attached to real property if the tangible personal property is permanently attached to an oil, gas, or water pipeline that is permanently attached to real property, unless the only purpose of the pipeline is to provide utility services to the oil or gas field.

[B.](2) Sales of extended warranty agreements.

[1.](a) Sales of extended warranty agreements or service plans are taxable, and tax must be collected at the time of the sale of the agreement. The payment is considered to be for future repair, which would be taxable. If the extended warranty agreement covers parts as well as labor, any parts that are exempt from sales tax pursuant to Section 59-12-104 must be separately stated on the invoice or the entire charge under the extended warranty agreement is taxable. Repairs made under an extended warranty plan are exempt from tax, even if the plan was sold in another state.

[a)](i) Repair parts provided and services rendered under the warranty agreements or service plans are not taxable because the tax is considered prepaid as a result of taxing the sale of the warranty or service plan when it was sold.

[b)](ii) If the customer is required to pay for any parts or labor at the time of warranty service, sales tax must be collected on the amount charged to the customer. Sales tax must also be collected on any deductibles charged to customers for their share of the repair work done under the warranty agreement. Parts or materials that are exempt from sales tax pursuant to Section 59-12-104 must be separately stated on the invoice or the entire charge for labor and parts is taxable.

[2.](b) Extended warranties on items of tangible personal property that are converted to real property are not taxable. However, the taxable nature of parts and other items of tangible personal property provided in conjunction with labor under an extended warranty service shall be determined in accordance with R865-19S-58.

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

2005

Notice of Continuation April 5, 2002

59-12-103

ADDITIONAL INFORMATION

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For questions regarding the content or application of this rule, please contact Cheryl Lee at the above address, by phone at 801-297-3900, by FAX at 801-297-3919, or by Internet E-mail at clee@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.