File No. 34268
This rule was published in the December 15, 2010, issue (Vol. 2010, No. 24) of the Utah State Bulletin.
Tax Commission, Auditing
Section R865-19S-78
Charges for Labor and Repair Under an Extended Warranty Agreement Pursuant to Utah Code Ann. Sections 59-12-103 and 59-12-104
Notice of Proposed Rule
(Amendment)
DAR File No.: 34268
Filed: 12/01/2010 09:27:10 AM
RULE ANALYSIS
Purpose of the rule or reason for the change:
The proposed amendment will treat all transactions in the same manner as bundled transactions are treated under statute, and clarifies the current treatment of service plan charges for items of tangible personal property that are permanently attached to real property.
Summary of the rule or change:
Amendment removes language indicating that in a purchase consisting of taxable and nontaxable items, the nontaxable items must be separately stated on the invoice or the entire purchase is subject to sales tax. The standard for recording these transactions will be in the amended Section R865-19S-4. This amended section will allow the seller to separately state the nontaxable items on the invoice or be able to reasonably identify them from the books and records it keeps in its regular course of business. In addition, the proposed amendment clarifies the current treatment of service plan charges for items of tangible personal property that are permanently attached to real property. (DAR NOTE: the proposed amendment to Section R865-19S-4 was published under DAR No. 33848 in the August 15, 2010, issue of the Bulletin and was effective 09/23/2010.)
State statutory or constitutional authorization for this rule:
- Section 59-12-104
- Section 59-12-103
Anticipated cost or savings to:
the state budget:
The proposed amendment does not impact the amount of tax due; only the recordkeeping requirements of the seller. The clarification of the treatment of service plan charges matches commission practice.
local governments:
The proposed amendment does not impact the amount of tax due; only the recordkeeping requirements of the seller. The clarification of the treatment of service plan charges matches commission practice.
small businesses:
None--Sellers are currently acting within the scope of the proposed amendment. The proposed amendment will allow sellers who sell taxable and nontaxable items in a nonbundled transaction the same invoicing options as the seller of a bundled transaction. The clarification of the treatment of service plan charges matches commission practice.
persons other than small businesses, businesses, or local governmental entities:
None--Sellers are currently acting within the scope of the proposed amendment. The proposed amendment will allow sellers who sell taxable and nontaxable items in a nonbundled transaction the same invoicing options as the seller of a bundled transaction. The clarification of the treatment of service plan charges matches commission practice.
Compliance costs for affected persons:
None--Sellers are currently acting within the scope of the proposed amendment. The proposed amendment will allow sellers who sell taxable and nontaxable items in a nonbundled transaction the same invoicing options as the seller of a bundled transaction. The clarification of the treatment of service plan charges matches commission practice.
Comments by the department head on the fiscal impact the rule may have on businesses:
None anticipated.
Michael Cragun, Commissioner
The full text of this rule may be inspected, during regular business hours, at the Division of Administrative Rules, or at:
Tax CommissionAuditing
210 N 1950 W
SALT LAKE CITY, UT 84134
Direct questions regarding this rule to:
- Christa Johnson at the above address, by phone at 801-297-3901, by FAX at 801-297-3907, or by Internet E-mail at [email protected]
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:
01/14/2011
This rule may become effective on:
01/21/2011
Authorized by:
R. Bruce Johnson, Tax Commission Chair
RULE TEXT
R865. Tax Commission, Auditing.
R865-19S. Sales and Use Tax.
R865-19S-78.
Service Plan Charges for Labor and Repair [Under an Extended Warranty Agreement
]Pursuant to Utah Code Ann. Sections 59-12-103 and
59-12-104.
[(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) 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.](1) "Service plan" includes an extended warranty
agreement or other prepaid arrangement.
(2)(a) Service plan charges for a future taxable repair are subject to sales tax.
(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]deductible charged to [customers]a customer for [their]the customer's share of the repair [work] done under the [warranty agreement]service plan.[
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)](3)(a) [Extended warranties on]Service plan charges for 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.]
(b) Service plan charges for items of tangible personal property that are permanently attached to real property are treated as follows:
(i) service plan charges for labor are not taxable; and
(ii) service plan charges for parts are taxable unless exempt under Title 59, Chapter 12, Part 1, Tax Collection.
(6) Rule R865-19S-58 outlines the sales tax responsibility of a person that converts tangible personal property to real property.
KEY: charities, tax exemptions, religious activities, sales tax
Date of Enactment or Last Substantive Amendment: [September 23, 2010]2011
Notice of Continuation: March 13, 2007
Authorizing, and Implemented or Interpreted Law: 9-2-1702; 9-2-1703; 10-1-303; 10-1-306; 10-1-307; 10-1-405; 19-6-808; 26-32a-101 through 26-32a-113; 59-1-210; 59-12; 59-12-102; 59-12-103; 59-12-104; 59-12-105; 59-12-106; 59-12-107; 59-12-108; 59-12-118; 59-12-301; 59-12-352; 59-12-353
Additional Information
The Portable Document Format (PDF) version of the Bulletin is the official version. The PDF version of this issue is available at https://rules.utah.gov/publicat/bull-pdf/2010/b20101215.pdf. The HTML edition of the Bulletin is a convenience copy. Any discrepancy between the PDF version and HTML version is resolved in favor of the PDF version.
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For questions regarding the content or application of this rule, please contact Christa Johnson at the above address, by phone at 801-297-3901, by FAX at 801-297-3907, or by Internet E-mail at [email protected].