DAR File No. 28863

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.: 28863
Filed: 06/30/2006, 02:55
Received by: NL

RULE ANALYSIS

Purpose of the rule or reason for the change:

The proposed amendment deletes language that has been codified in S.B. 89 (2006). (DAR NOTE: S.B. 89 (2006) is found at Chapter 231, Laws of Utah 2006, and was effective 07/01/2006.)

Summary of the rule or change:

The proposed amendment deletes language stating that whether tangible personal property is permanently attached to real property shall be determined without regard to the tangible personal property's attachment to a line that supplies water, electricity, gas, telephone, cable, or other similar services.

State statutory or constitutional authorization for this rule:

Sections 59-12-103 and 59-12-104

Anticipated cost or savings to:

the state budget:

None--Any fiscal impact would have been taken into account in S.B. 89 (2006).

local governments:

None--Any fiscal impact would have been taken into account in S.B. 89 (2006).

other persons:

None--Any fiscal impact would have been taken into account in S.B. 89 (2006).

Compliance costs for affected persons:

None--The language that is deleted in this rule and was codified in S.B. 89 (2006) reflects Tax Commission practice.

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

Any fiscal impact hs already been reflected with codification of practice. D'Arcy Dixon Pignanelli, Commissioner

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:

08/14/2006

This rule may become effective on:

08/21/2006

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]and Repair [or Renovate Tangible Personal Property]Under an Extended Warranty Agreement Pursuant to Utah Code Ann. [Section]Sections 59-12-103 and 59-12-104.

[A. 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. Sales of extended warranty agreements.

1.](1) 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)](a) 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)](b) 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.](2) 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

Date of Enactment or Last Substantive Amendment: [October 13, 2005]2006

Notice of Continuation: April 5, 2002

Authorizing, and Implemented or Interpreted Law: 59-12-103; 59-12-104

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.