Effective Date: Retrospective to January 1, 1996

Re: Collection of Sales Tax on Transportation Provided by Bus, Limousine, Taxi, and Van Companies

Tax Bulletin 8-95, issued in December 1995, indicated that interstate transportation services provided by bus, limousine, taxi, and van companies would be subject to Utah sales tax effective January 1, 1996. Tax Bulletin 8-95 was based on the 1995 United State Supreme Court decision in Oklahoma Tax Commission v. Jefferson Lines, Inc.

Subsequent to the distribution of Tax Bulletin 8-95, Congress passed, and President Clinton signed into law, HR 2539, dealing with state taxation of interstate passenger travel.
The purpose of this Tax Bulletin is to advise bus, limousine, taxi, and van companies of their Utah sales tax responsibilities in light of HR 2539. This Tax Bulletin supersedes tax Bulletin 8-95 for purposes of bus, limousine, taxi, and van companies.

Effects of HR 2539
HR 2539, Public Law 10488, preempts the United State Supreme Court decision in Jefferson Lines and prohibits a state from levying a tax on passenger travel in interstate commerce by motor carrier. Bus, limousine, taxi, and van companies are, therefore, exempt from collecting Utah sales tax on transportation services that cross Utah state lines.

Example: A passenger purchases a ticket to travel from Salt Lake to Wendover, Nevada. This is an example of interstate travel that is exempt from Utah sales tax.

The exemption from sales tax does not apply, however, if the carrier travels a circuitous or roundabout route that crosses state lines solely for the purpose of avoiding sales tax.

Example: A bus trip from Salt Lake to Flaming Gorge may legitimately pass out of Utah, through Wyoming, then back into Utah. This is an example of interstate travel that is exempt from Utah sales tax.

Example: On a bus trip from Salt Lake to St. George, a bus may not avoid the sales tax by driving into Arizona and turning around at a port of entry before delivering the passengers back in St. George.

While interstate travel is exempt from Utah sales tax, intrastate bus, limousine, and van transportation remains subject to Utah sales tax. (For the treatment of intrastate taxi transportation, see Tax Bulletin 6-96.) Intrastate transportation of passengers is not interstate merely because it is preceded or succeeded by interstate air travel. Local passenger service to or from the airport is subject to sales tax unless the transportation contract is between the airline and the carrier.

Example: Due to a problem, an aircraft makes an unexpected landing in Ogden. The airline arranges to bus the passengers to Salt Lake to pick up another flight and continue on their way. The charge to the airline for bus service is not taxable as a continuation of interstate commerce.

To ask questions about this Tax Bulletin, call the Customer Service Division at (801) 297-2200 or call toll-free 1-800-662-4335. To submit questions in writing, mail to Customer Service Division, 210 North 1950 West, Salt Lake City, UT 84134. Those who have impaired hearing may call the Telecommunication Device for the Deaf (TDD) at (801) 297-2020.