Union Pacific Railroad Company v. Auditing

In proceedings before the Utah State Tax Commission, Union Pacific Railroad Company sought relief from a sales and use tax deficiency order imposed against it by the Auditing Division of the Commission. After a formal hearing, the Commission determined that (1) Union Pacific owed sales and use tax on its in-state purchases of diesel fuel and ballast even though Union Pacific transported the materials for its own use outside of Utah; (2) Union Pacific owed sales and use tax on certain services performed in Oregon on cross ties (commonly known as railroad ties) it owned; and (3) in the future, the Commission may assess a sales tax on the full cost of repair services Union Pacific performs on the railcars of other carriers. Union Pacific now seeks review of these determinations. It also challenges the Auditing Divisions imposition of a penalty on the deficiency. We affirm the first determination, reverse the second, and decline to review the third. We also vacate the imposition of the penalty and remand the issue for further review by the Commission.