Utah – Taxability of Repairs to Turbine Generators

SALT Report 1670 – The Utah State Tax Commission issued a private letter ruling regarding the taxability of repairs made to turbine generators.  A Utah Taxpayer who sells and services turbine generators regards his services as taxable because the turbine generators are specialized equipment that can be removed, relocated or upgraded and retain their tangible personal property characteristics.  However, the Taxpayer has a customer who believes the charges for servicing the turbine generators should be an exempt service to real property.
When providing his repair services the Taxpayer either repairs the generators onsite or removes and repairs them offsite at his out-of-state facility.  If a generator must be removed for repair offsite the Taxpayer provides his customer with a spare generator, and once the repairs are completed the repaired generator is returned to the customer to be used as a spare.
The Commission determined that, once installed, the generators became tangible personal property because they are permanently attached to real property and remain attached to the real property for their lifetime. Because of this, repairs made to generators onsite are nontaxable if they remain permanently attached to the real property or are only temporarily detached during repair. However, any parts used in the onsite repairs are taxable.
Alternatively, repair services and parts used in generators that are removed and repaired offsite are taxable because the generators are no longer permanently attached to the real property while they were being repaired. The Commission also determined that although some repairs may be completed outside Utah, they remain taxable because the location of the repairs is deemed to be at the location where the customer contracted for the services, took possession of the repaired items, and made first use of them once they were returned.
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