Sales Tax State Activity Update - March 2004

After Market Installation of Tracking Units Taxable in Utah

The Utah Supreme Court has ruled that after market installation of satellite tracking units on certain commercial trucks operated by a Taxpayer are not exempt from sales tax under the authorized carrier exemption, because they are not a part of the vehicle when purchased.

The Taxpayer, Dick Simon Trucking, Inc., purchased satellite tracking units and attached them to his new trucks used in his trucking business. Following an audit, the Commission concluded that the tracking units were purchases of tangible personal property, and assessed sales tax accordingly. TheTaxpayer disagreed and petitioned the Commission for reconsideration, arguing that the satellite units are integral part of the vehicle and in addition, Utah Code section 59-12-104(36) (2000 & Supp. 2001) the Authorized Carrier Exemption, exempts the units from taxation.

Utah Code Ann. § 59-12-104(36) provides that "sales or leases of vehicles to, or use of vehicles by, an authorized carrier" are exempt from sales and use taxes. The Commissioner found the authorized carrier exemption inapplicable and upheld the tax assessment. The Taxpayer disagreed and petitioned the district court for review.

The question before the Court is whether the satellite tracking units qualify for the Authorized Carrier Exemption by virtue of the fact that the Taxpayer installs them and makes them part of its vehicles before use. The District Court ruled in favor of the Commission. Once again, The Taxpayer appealed, this time to the Supreme Court.

The Supreme Court concluded that the exemption does not apply to the Taxpayer’s purchases of satellite tracking units, because the satellite tracking unit purchases occur separately from and subsequent to the vehicle purchase transactions. Therefore, adding these units to the vehicles after the vehicle has been purchased does not make the units part of the vehicle for purposes of the exemption and affirmed the district court's grant of summary judgment for the Commission.

(Supreme Court of Utah, Dick Simon Trucking, Inc., v Utah State Tax Commission, {No. 20010560} January 30, 2004) 03/04

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