A subcontractor’s purchases of items for installation on Utah Department of Transportation (UDOT) public freeways and highways were not exempt since the items did not remain personal property once they were installed but rather, became real property subject to Utah sales and use tax. The items installed included sign structures, signage (on and off the freeway), guardrails, and crash cushions. In Utah, sales of tangible personal property are taxable and sales of real property are exempt. Sales of tangible personal property that is not converted to real property are exempt if sold to Utah, its institutions, or its political subdivisions. UDOT is a state entity. However, the items installed by the subcontractor became real property upon installation because:
The contracts between the subcontractor and UDOT did not contemplate that the freeway and/or highway system that was the primary essence, purpose, or object of these transactions would be removed for repair and replacement. The subcontractor and UDOT both treated the contracts as real property contracts, not contracts for the purchase of real property.
For all of the above reasons, the items became real property upon installation and therefore qualify as taxable sales of real property. (Commission Decision, Appeal No. 15-761, Utah State Tax Commission, February 27, 2018, released October 2018)