Nickerson Pump & Machinery Co. v. State Tax Commission, 9353
| Decision Date | 25 April 1961 |
| Docket Number | No. 9353,9353 |
| Citation | 12 Utah 2d 30,361 P.2d 520 |
| Parties | d 30 NICKERSON PUMP & MACHINERY CO., Inc., Plaintiff, v. STATE TAX COMMISSION of Utah, Defendant. |
| Court | Utah Supreme Court |
Fabian & Clendenin, Earl Wunderli, Kent Shearer, Salt Lake City, for plaintiff.
Walter L. Budge, Atty. Gen., F. Burton Howard, Asst. Atty. Gen., for defendant.
Certiorari to review the validity of the imposition by the Utah State Tax Commission, defendant herein, against the Nickerson Pump & Machinery Co., Inc., plaintiff herein, of a deficiency tax assessment of emplaced water pumps furnished by plaintiff to governmental units which are exempted from payment of sales taxes.
The deficiency assessment was based on water pumps assembled from parts to the specifications of the governmental agencies and emplaced by plaintiff under lump sum contracts. In lump sum contracts the cost of labor for emplacement of the pumps is included in the price charged for the pumps and is not charged separately. However, the actual cost is considered as a separate item and included by the plaintiff in its computation in arriving at the amount it will bid to obtain the business. Plaintiff is a dealer in pumping and allied equipment and specializes in water pumps. It has a Utah retail sales license. In selling and emplacing water pumps to private customers under similar lump sum contracts as those involved herein it has always collected a sales tax. Pumps are emplaced without permanent attachment to realty so that they may be readily removed for use in other places or for repairs which are frequently necessary. Although nothing was said in the agreements whether the emplaced pumps were to be considered as realty or personal property, plaintiff has always collected sales taxes on the full amount charged including the emplacement charge. Where it has been necessary for plaintiff to obtain a form of security in its sales of pumps it has used a title retaining or conditional sales contract. The deficiency assessments were imposed on the theory that in assembling and emplacing the water pumps under a lump sum agreement plaintiff was the ultimate consumer of its product and therefore liable for either a sales or use tax under the provisions of Sections 59-15-4 and 59-16-3, U.C.A.1953, depending upon whether the materials were purchased within or without the state.
Sec. 59-15-4, U.C.A.1953, so far as pertinent here provides that there be levied and paid:
'(a) A tax upon every retail sale of tangible personal property made within the state of Utah equivalent to two per cent of the purchase price paid or charged, * * *'.
Sec. 59-16-3, U.C.A.1953, provides that:
'There is levied and imposed an excise tax on the storage, use or other consumption in this state of tangible personal property purchased on or after July 1, 1937, for storage, use or other consumption in this state at the rate of two per cent of the sales price of such property.
'Every person storing, using or otherwise consuming in this state tangible personal property purchased shall be liable for the tax imposed by this act, and the liability shall not be extinguished until the tax has been paid to this state.'
However, Sec. 59-16-4, U.C.A.1953, subsection (h) exempts from the provisions of the use tax:
'Property which enters into and becomes an ingredient or component part of the property which a person engaged in the business of manufacturing, compounding for sale, profit or use manufactures or compounds, or the container, label or the shipping case thereof.'
Since plaintiff is a dealer in pumps and allied equipment which it assembles for sale the above quoted exemption should apply, unless by its agreements to both assemble and emplace for a lump sum the water pumps it sells it becomes the ultimate consumer of the parts used by it in assembling the pumps. In Union Portland Cement Co. v. State Tax Commission, 1 this court said that subsection (h) of what is now Sec. 59-16-4, U.C.A.1953, exempts only items which become a In the instant case, however, the evidence is clear...
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