Your 1099-G is correct. Use tax is not income tax. Part of your income tax refund was used to pay the use tax, but it's still part of your income tax refund.
Here's an example. Suppose your total state income tax for the year, not including use tax, was $4,000, and your state tax withheld was $4,500. You were entitled to a $500 income tax refund. But you owed $100 of use tax. So $100 of your refund was taken to pay the use tax, and the net refund that you actually received was $400. You only got $400, but your income tax refund was really $500. It's the same as if they had sent you the entire $500 and then you wrote a check to pay the $100 of use tax that you owed. Your 1099-G shows a refund of $500, but you used $100 of that to pay the use tax. Paying the use tax out of your income tax refund does not mean that your income tax refund was less.
The person you spoke to at the Utah Tax Commission was right, but didn't explain it very well.
