Wyoming: Certain Services were Not Taxable Alterations or Improvements

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Detailed Wyoming Development

The Wyoming State Board of Equalization recently concluded that a taxpayer was not providing taxable alteration or improvement services to tangible personal property. The taxpayer at issue operated a vehicle towing and recovery business. Following a sales tax audit, the taxpayer was assessed for sales taxes not collected on three services: unlocking vehicles, changing flat tires, and jump-starting vehicles. The taxpayer appealed the assessment to the Board of Equalization.  Under Wyoming law, sales and use tax on “services performed for the repair, alteration, or improvement of tangible personal property.” Before the Board, the Department of Revenue (Department) agreed with the taxpayer that the services at issue were not repairs, but asserted that they were taxable as alterations or improvements to tangible personal property. The Board first determined that the statutory language imposing tax on alteration or improvement services was not ambiguous. As such, because these terms were not defined, the Board looked to dictionary definitions to determine their ordinary meanings. “Alter,” the Board concluded, meant “to make different without changing into something else.” A hallmark of an “improvement” was “an increase in value.” In short, the parties disagreed over whether these services altered or increased the value of the vehicles. The Department testified that, for instance, jump-starting a vehicle “alter[s] the vehicle from a vehicle that didn’t start to a vehicle that did.”  In contrast, the taxpayer testified that none of the services improved a vehicle or increased its value. The Board, reversing the assessment, concluded that the Department interpreted “alteration” and “improvement” too broadly and did not prove by a preponderance of the evidence that the services were taxable. Please contact Stephen Metz for more information on Big Al’s Towing & Recovery.

This Week's Developments

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Featured Speaker

Sarah McGahan

Sarah McGahan

Managing Director, State & Local Tax, KPMG US