How does Utah sales tax apply when a company sells and installs manufactured homes — in a rented trailer-park space versus permanently installed on the customer's own real property — and does the 45% manufactured-home exemption apply?

Plain-English summary

A manufactured home dealer asked the Commission for the tax "formula" covering two different business situations: (1) selling and installing homes in a trailer park, where the customer rents the space and the dealer does the slab, utility hookups, awnings, and decks; and (2) selling homes that go onto real property, sometimes with the dealer handling the full installation (foundation, electrical, plumbing, garage) and sometimes with the customer handling installation after the dealer just delivers and sets the home on a foundation.

The Commission's answer turns entirely on whether the home (and any accessories) become real property or stay tangible personal property, and on who does the installing:

• Dealer sells AND installs the home, permanently anchoring it per state installation standards and permanently connecting it to plumbing, electrical, and other utilities: the dealer becomes a real property contractor under Rule R865-19S-58 — regardless of who owns the underlying land or what kind of foundation/slab is used. As the contractor, the dealer owes sales tax on its own purchase of the home from the manufacturer, and its later sale to the customer isn't separately taxed.
• Dealer sells the home but the customer arranges installation: the dealer must collect sales tax directly from the customer on the home and on any separately sold items (like plumbing or electrical equipment supplied along with it).

The 45% partial exemption for new manufactured homes applies differently depending on which scenario applies:

• When the dealer is the real property contractor, it pays sales tax on only 55% of its purchase price from the manufacturer. Everything that comes as part of the manufactured-home "package" from the factory — the ruling gives the example of an awning, swamp cooler, furniture, and appliances — qualifies for this partial exemption. Items the dealer buys separately (cement for the pad, landscaping materials) are fully taxable at 100% of the purchase price and don't get the partial break.
• When the dealer sells as personal property (customer installs), the exemption covers the home as it arrived from the manufacturer plus dealer "add-ons" that get attached and become an integral part of the dwelling. Stand-alone items like unattached carports or sheds don't qualify and are taxed at 100% of their sales price.

Delivery charges are part of the taxable amount unless delivery is by common carrier and happens after title passes to the purchaser (Rule R865-19S-71). And for anything that isn't really "part of the home" — unattached garages, carports, sheds — the same real-property-vs-personal-property rule applies to decide who owes the tax, but none of these items ever qualify for the 45% partial exemption regardless of how they're taxed.

What this means for you

Manufactured/mobile home dealers who install what they sell

If you permanently anchor and hook up utilities on a home you sell, you're a real property contractor for that transaction — pay sales tax on 55% of your own purchase price from the manufacturer (with factory-included extras covered by the same partial exemption), and don't separately charge your customer sales tax on the home.

Dealers who sell homes for customer-arranged installation

Collect sales tax directly from your customer on the home and any separately supplied items. The 45% exemption still applies to the home itself and to attached, integral dealer add-ons, but not to stand-alone accessories like unattached carports or sheds.

Dealers pricing separate site-work items (pads, landscaping, unattached structures)

None of these ever get the 45% partial exemption — apply the ordinary real-property-vs-personal-property test (who pays: you as contractor, or your customer as buyer) to each item separately, and tax them at their full purchase or sales price.

Common questions

Q: When does a manufactured home dealer become a "real property contractor" for tax purposes?
A: When the dealer installs the home so it's permanently anchored per state standards and permanently connected to plumbing, electrical, and other utilities — regardless of who owns the land or the foundation type.

Q: What is the 45% partial exemption and how is it calculated?
A: A partial sales tax exemption for new manufactured homes. When the dealer is the real property contractor, tax is calculated on only 55% of the dealer's purchase price from the manufacturer, covering the home and any factory-included package items.

Q: Do detached garages, carports, or sheds sold with a manufactured home qualify for the partial exemption?
A: No. Stand-alone, unattached items don't qualify for the 45% exemption and are taxed at 100% of their price, following the standard real-property-vs-personal-property rule for who owes the tax.

Q: Are delivery charges for a manufactured home taxable?
A: Yes, unless delivery is by common carrier and occurs after title has already passed to the purchaser.

Q: Does this ruling apply to my manufactured home sales business?
A: Not automatically. This is a private letter ruling binding only on the Commission as to this taxpayer's specific facts. It can't be relied on as binding by anyone else, though it may carry weight if your facts closely match.

Citations and references

Statutes and rules:

• Utah Admin. Rule R865-19S-58 (contractor liable for sales tax on items converted to real property)
• Utah Admin. Rule R865-19S-71 (delivery charge taxability — common carrier after passage of title)
• Utah's 45% partial sales tax exemption for new manufactured homes (dealer-as-contractor taxed on 55% of purchase price)
• Utah State Tax Commission Publication 42 (real property vs. tangible personal property distinction)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/97-053.pdf

Original ruling text

97-053

Response
October 7, 1997

REQUEST
LETTER

Dear
Ms. Rees,

I have just spoken with Jeff McNemar
in one of your office and he has suggested I write to you for an Advisory
Opinion.

We at NAME sell manufactured
homes. There are two separates
situations.

1. We
   sell & manufacture homes that go into a trailer park. The customer is renting the space. We do the slab, sinking, hook-up of
   electric, gas, water, etc., components, awnings & decks.

2. We
   sell homes that goes on real property.

a. We deliver the home and set it on a
foundation. The customer who owns the
property does all the electric, plumbing, etc.

b. We sell the home deliver it, do the
foundation, electric improvements, plumbing hook-ups, garage, etc.

What are the formulas for taxes on
these situations.

Thank
you,

NAME

October
7, 1997

NAME

ADDRESS

CITY
STATE ZIP

Advisory
Opinion - Sales tax on sales of manufactured homes installed on real property.

Dear
NAME,

We have received your request for
sales tax guidance pertaining to your company's sales of manufactured homes
installed in connection with real property in Utah. On the basis of your telephone conversation with Jeff McNemar of
the Auditing Division, we understand
that you sell manufactured homes and that you may also sell accessories or
other items used in conjunction with the home.
The purchaser may contract with you to install the home, but in some
cases the purchaser makes other
arrangements for installation. We
offer the following tax guidance:

The question of who is responsible
to pay sales tax on the items described in your letter depends upon whether the
item is converted to real property or remains tangible personal property after
affixture to real property. Utah
Administrative Rule R865-19S-58 (copy enclosed) explains that when a contractor
purchases construction materials and converts the materials to real property,
the contractor must pay sales tax at the time he purchases the materials. Therefore, you are liable to pay the sales
tax on your purchase of any item that you convert to real property.

Your
subsequent sale of such item to your customer is not taxable. With regard to items that you sell as
tangible personal property, you are required to collect sales tax from your
customers on these transactions.

When you sell and install a
manufactured home, you are considered a real property contractor under rule
R865-19S-58 if you install the manufactured home on real property so that it is
permanently anchored in compliance with state installation standards and
permanently attached to plumbing, electrical systems and other utilities. This is true without regard to the nature of
the foundation or slab that sits under the home or who owns the underlying real
property. As a real property
contractor, you are liable for the sales tax due on items that you purchase and
install in this manner.

When you sell a manufactured home
and the purchaser installs the home, you must collect sales tax on the
transaction from your customer for the home and any other items sold
separately, such as plumbing and electrical equipment that you may supply to
the customer. Delivery charges are part
of the taxable amount unless delivery is by common carrier and delivery takes
place after title passes to the purchaser.
Utah Administrative Rule R865-19S-71 (copy enclosed) outlines the
provisions concerning delivery charges.

Mr. McNemar has indicated to us that
you expressed concern about the application of the 45% partial sales tax
exemption available on the sale of new manufactured homes, so we address that
issue as follows:

In a transaction in which you are
considered a real property contractor, you are liable for sales tax calculated
on 55% of your purchase of the home from the manufacturer. We consider all items purchased from the
manufacturer as part of the manufactured home "package" to qualify for the
exemption. For instance, if the home
comes to you from the manufacturer with an awning, a swamp cooler, furniture
and appliances, those items qualify for the partial exemption. Other items that you purchase separately,
such as cement for the pad or landscaping materials are taxable at 100% of your
purchase price.

In a transaction in which you sell a
manufactured home as tangible personal property (the purchaser arranges
installation), the amount charged for the home as it arrived from the
manufacturer, plus the amounts charged for dealer "add-ons" that are attached
to and that become an integral part of the dwelling are eligible for
exemption. Items such as stand-alone
carports or sheds that are not attached and integral to the home are not
eligible for this exemption, and they must be taxed at 100% of their sales
price.

With regard to items that are not
part of the home, such as unattached garages, carports and sheds, the rules
pertaining to tax liability are the same.
If you purchase construction materials and convert them to real
property, you are liable for sales or use tax on your purchase of those
items. If the items remain tangible
personal property after affixture, you must collect sales tax from your
customer. These items do not qualify
for the partial exemption. (See Tax
Commission Publication 42, enclosed, for more information about the distinction
between real and tangible personal property.)

Please let us know if you have other
questions.

For
the Commission,

Joe
B. Pacheco,

Commissioner