Tax Commission, Auditing

Section R865-19S-42

Sales to The State of Utah and Its Subdivisions Pursuant to Utah Code Ann. Section 59-12-104

Notice of Proposed Rule

(Amendment)

DAR File No.: 34882
Filed: 05/26/2011 11:40:34 AM

RULE ANALYSIS

Purpose of the rule or reason for the change:

Section 59-12-104.6 requires the sales tax exemption for state and local government lodging related purchases be granted in the form of a refund of sales tax paid and authorizes the commission to promulgate rules providing procedures for those refunds.

Summary of the rule or change:

The proposed amendment indicates the procedures a state or local government must follow to receive a refund of sales tax paid on lodging related purchases that are exempt from sales tax, including the records the state or local government must retain.

State statutory or constitutional authorization for this rule:

• Section 59-12-104.6

Anticipated cost or savings to:

the state budget:

Any fiscal impact was considered in H.B. 82 (2011 General Session). (DAR NOTE: H.B. 82 (2011) will be effective 07/01/2011.)

local governments:

Any fiscal impact was considered in H.B. 82 (2011).

small businesses:

Any fiscal impact was considered in H.B. 82 (2011).

persons other than small businesses, businesses, or local governmental entities:

Any fiscal impact was considered in H.B. 82 (2011).

Compliance costs for affected persons:

When H.B. 82 (2011) becomes effective, 07/01/2011, state and local government entities that qualify for a sales tax exemption on their lodging-related purchases will no longer receive the sales tax exemption at the point of sale, but must pay the sales tax up front on the purchases and apply to the Tax Commission for a refund of the tax.

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

When H.B. 82 (2011) becomes effective, 07/01/2011, state and local government entities that qualify for a sales tax exemption on their lodging-related purchases will no longer receive the sales tax exemption at the point of sale, but must pay the sales tax up front on the purchases and apply to the Tax Commission for a refund of the tax.

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 Commission
Auditing
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 cj@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:

07/15/2011

This rule may become effective on:

07/22/2011

Authorized by:

Michael Cragun, Tax Commissioner

R865. Tax Commission, Auditing.

R865-19S. Sales and Use Tax.

R865-19S-42. [Sales to The]Purchases by the State of Utah, Its Institutions, and Its Political Subdivisions Pursuant to Utah Code Ann. [Section]Sections 59-12-104 and 59-12-104.6.

(1) "Lodging related purchase" is as defined in Section 59-12-104.6.

[A.](2) [Sales]A purchase made [to]by the state[ of Utah], its [departments and] institutions, or [to] its political subdivisions such as counties, municipalities, school districts, drainage districts, irrigation districts, and metropolitan water districts [are]is exempt from tax if the purchase is for use in the exercise of an essential governmental function.

[B.](3) A [sale]purchase is considered made [to]by the state, its [departments and] institutions, or [to] its political subdivisions if the purchase is paid for directly by the purchasing state or local entity. If an employee of a state or local entity pays for a purchase with [his]the employee's own funds and is reimbursed by the state or local entity, that [sale]purchase is not made [to]by the state or local entity and does not qualify for the exemption.

(4) An entity that qualifies under Subsections (2) and (3) for an exemption from sales and sales-related tax on a lodging related purchase:

(a) may not receive that exemption at the point of sale; and

(b) may apply for a refund of tax paid on forms provided by the commission.

(5) An entity that applies for a refund of sales and sales-related tax paid under Subsection (4)(b) shall:

(a) retain a copy of a receipt or invoice indicating:

(i) the amount of sales and sales-related tax paid for each purchase for which a refund of tax paid is claimed; and

(ii) the purchase was paid for directly by the entity; and

(b) maintain original records supporting the refund request for three years following the date of the refund and provide those records to the commission upon request.

[ C. Vendors making exempt sales to the state, its departments and institutions, or to its political subdivisions are subject to the recordkeeping requirements of Tax Commission rule R865-19S-23.

]

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

Date of Enactment or Last Substantive Amendment: [January 27,] 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