Utah – Remitting Tax Based on Payments Received and Bad Debt Deductions

SALT Report 1498 – The Utah State legislature recently enacted legislation that changes the sales and use tax collection and remittance requirements for sales that involve the delivery, installation, or conversion of tangible personal property into real property.

Effective July 1, 2012, if a sale includes the delivery or installation of tangible personal property at a location other than a seller’s place of business or if the delivery or installation is separately stated on an invoice or receipt, the seller should calculate the amount of tax due using a ratio based on the amount received for that sale.

To determine the amount of tax to remit, a qualified purchaser will apply a ratio to the total amount of tax due on purchases of tangible personal property that were converted into real property. The numerator of the ratio is the payment received. The denominator is the entire sales price for the sale of the tangible personal property that was converted into real property. The ratio method can only be applied if the books and records that the purchaser keeps can verify that the tangible personal property was converted into real property.

A qualifying purchaser may deduct from the total amount of taxes due the amount of tax it paid on purchases of tangible personal property that was converted into real property if:

  • Tax was remitted using the ratio method,
  • The qualified purchaser’s sale of that tangible personal property converted into real property later becomes a bad debt, and
  • The books and records that the qualifying purchaser keeps in the regular course of business clearly identify that the tangible personal property was converted into real property
Additionally, when taxes are remitted, the seller may deduct a bad debt from the total amount of taxes due on their return.
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