Oct 05, 2015
From KPMG TaxWatch
The Wyoming State Board of Equalization recently addressed whether telecommunications equipment temporarily stored in Wyoming prior to shipment to Montana was subject to Wyoming use tax. The taxpayer, a telephone service cooperative, hired a telecommunications equipment manufacturer to deliver and install equipment at various locations in Wyoming and Montana. The vendor shipped the equipment to the taxpayer at its Wyoming location. In Wyoming, the taxpayer’s personnel divided the shipments, stored the equipment for three days at a co-op member’s facilities, and then transported the equipment to the installation sites. Under the terms of the contract, the taxpayer did not take final possession of the equipment until it was installed and functional. After the Department concluded that use tax was owed on equipment temporarily stored in Wyoming that was ultimately installed into systems in Montana, the taxpayer appealed.
Under Wyoming law, use tax is imposed on persons “storing, using or consuming tangible personal property.” The Department’s regulations clarify that use tax applies when tangible personal property is “first stored, first used or first consumed in Wyoming.” However, use tax is not imposed on “tangible personal property purchased outside Wyoming for use in other states, but shipped to and temporarily stored in Wyoming pending shipment to another state.” On appeal, the Board looked at the contract between the parties, as well as the testimony of a key employee, and observed that ownership of the equipment did not pass to the taxpayer in Wyoming when it was sorted. Rather than simply purchasing equipment, the taxpayer had purchased an integrated system that required installing and testing before it was transferred to the taxpayer from the retailer. As such, because ownership of the equipment remained with the vendor, the Board concluded that the taxpayer did not “use” the property in Wyoming. The Board further concluded that the taxpayer’s brief storage and sorting of the equipment in Wyoming did not constitute “storage” under Wyoming’s use tax laws because the property was pending shipment to another state. In reaching this conclusion, the Board rejected the Department’s interpretation that temporary storage requires a “continuous shipping stream” that can occur only through transfer from one common carrier to another common carrier. As a result, the Board found that the equipment ultimately destined for installation in Montana was not subject to Wyoming use tax. For more information on Appeal of Range Telephone Coop, Inc., please contact Stephen Metz at (303) 382-7177.
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The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.