BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX,
Petitioner, )
:
v. ) INFORMAL DECISION
:
)
AUDITING
DIVISION, : Appeal No. 86 0038
STATE TAX
COMMISSION OF UTAH, ) Audit Period XXXXX
: through
XXXXX
Respondent. )
_____________________________________
STATEMENT OF CASE
An
informal hearing was held on June 23, XXXXX.
XXXXX, XXXXX Attorney, and XXXXX represented Petitioner. XXXXX, Assistant Attorney General, and XXXXX
represented the Respondent. Chairman R.
H. Hansen and Hearing Officer, XXXXX, heard the matter for the Utah State Tax
Commission.
Respondent
audited the Petitioner for the period January 1, XXXXX, through September 30,
XXXXX. Petitioner challenges the sales
and use tax assessments for the audit period on the following:
1. XXXXX:
a) daily admissions,
b) annual and
semi-annual admission passes,
c) group use
admissions,
d) indoor programs,
e) special events,
f) equipment rental;
2. Animal sales by the XXXXX;
3. Miscellaneous sales including charges for
accident reports and police reports;
4. Photocopies made at the XXXXX public
library;
5. Sales from land fill salvage;
With regard to
admissions charges to the XXXXX, Petitioner argued that Respondent erred in its
interpretation of Utah Code Ann. §
59-15-4(d)(1) and § 59-15-2(10) (Supp. 1986).
Section 59-15-4 requires a sales tax on the price of admission to any
place of amusement, entertainment, or recreation. Section 59-15-2(10) defines admission. Petitioner believes that the XXXXX is not primarily a place of
recreation but is a fitness facility.
In support of its argument, Petitioner pointed out that private spas,
fitness centers, golf courses, and bowling alleys are not required to charge
sales tax on sales of their membership fees.
Petitioner also urged that golfing and bowling are more recreational
than the activities the XXXXX offers; thus, it is arbitrary and discriminatory
to require the XXXXX to charge tax on its fees but not to require private
health centers and recreational centers to charge sales tax.
With regard to group
use admissions, Petitioner argued that these charges are simply discounted
admissions given to certain groups that use the facilities. Also, the money collected for indoor
programs are simply membership fees which enable individuals to participate in
the activity or team.
Petitioner argues that
the XXXXX is not a retailer as defined in Utah Ann. § 59-15-2(5) (Supp. 1986).
It urged that any sales or charges it made under categories 2 through 5
listed above are "isolated or occasional" sales within meaning of Tax
Commission Rule A12-02-S38. Under the
Sales Tax Act, sales tax is to be collected only on sales made by a retailer in
a regularly organized retail business.
Respondent argued with
regard to the XXXXX charges that the admission charges are for recreational
activities and thus subject to the sales tax.
It pointed out that Tax Commission Rule A12-02-S34, in defining
"place of amusement, entertainment, recreation," imposes a sales tax
on participants of some activity within the place of amusement, entertainment
or recreation. Rule S47 subjects the
charge for admission to swimming pools, skating rinks, and other places of
amusement to sales tax. Respondent
agreed with the Petitioner that charges for the use of private health spas,
golf courses, and bowling alleys are not normally taxable because the charges
are not made to enter a place of amusement but are a charge for the use of the
facility. Payment is only required from persons actually using the
facilities. Respondent argued that
Petitioner was not assessed tax on charges that entitle the participant to use
the facilities. Respondent also argued
that Petitioner's activities are not directly analogous to activities of
private health spas and that private health spas and fitness facilities would
be required to collect sales tax if their admissions or fees charged were
primarily for recreational activities.
Respondent
acknowledged that Petitioner's primary business is not as a retailer but
pointed out that any person (including a municipal corporation) which has
regular retail transactions is subject to the requirements of collecting the
tax. The fact that the sales may be few
or infrequent does not make them isolated or occasional sales within the Sales
Tax Act and the rules promulgated under the Act.
FINDINGS
1. Utah Code Ann. § 59-15-4(1)(d) (Supp. 1986) requires tax to be collected on "the
amount paid for admission to any place of amusement, entertainment, or
recreation." Section 59-15-2(10) defines admission. "Admission" includes seats and
tables or otherwise, and other similar accommodations and charges made therefor and "amount paid for
admission" means the amount paid for such admission, exclusive of any
admission tax imposed by the federal government or by this act.
2. Tax Commission Rule A12-02-S33 further
explains the meaning of the term admission.
The term "admission" means the right or privilege to enter
into a place including seats and tables reserved or otherwise and other similar
accommodations and charges made therefor.
The amount paid for the right to use a reserved seat or any seat in an
auditorium, theatre, circus, stadium, schoolhouse, meeting house or gymnasium
to view any type of entertainment is taxable.
Tax Commission Rule A12-02-S34
indicates that "place of amusement, entertainment, or recreation" has
a broad meaning but does convey the idea of a definite location and requires
the amount paid for admission to such be subject to tax even though the
purchaser may participate in some activity within the place. "For example, the sale of a ticket for
a ride upon a mechanical or self-operated device is an admission to a place of
amusement." Id.
3. "Retailer" is defined by 59-15-2(5) (Supp. 1986) as "a person
doing a regularly organized retail business in tangible personal property, and
selling to the user or consumer . . . ." Subsection (6) defines
"retail sales" as "every sale within the state of Utah by a
retailer or wholesaler to a user or consumer . . . but [does not] include
isolated nor occasional sales by persons not regularly engaged in business . .
. ."
4. Tax Commission Rule A12-02-S27 indicates
that the term "retail sale" is broad and includes transfers,
exchanges, or barters and that the "quantity sold or the extent of the
clientele are not factors which determine a sale to be or not to be a retail
sale." Tax Commission Rule A12-02-S28 points out that one may be a
retailer within the meaning of the Act even though the sale of tangible
personal property is merely incidental to the general business.
5. Based on the foregoing provisions of the
Utah Sales Tax Act and the rules promulgated under the Act, the Commission
finds that with regard to the XXXXX, the admissions charges in the form of
daily admissions and annual and semi-annual fees, group use admissions, and
fees for indoor programs are not taxable admissions within the meaning of the
Act. These charges are not admission
charges to a "place of amusement, entertainment, or recreation," but
are charges for use of the XXXXX facilities.
The Commission finds, based on the evidence presented, that Petitioner's
facilities are very much like those of private health spas, the fees for which
are not taxable.
The Commission finds,
however, that equipment rental charges and admission to special events such as
youth dances are taxable transactions.
The Commission further
finds that the sale of animals, the sale of photocopies at the XXXXX, and sales
from landfill salvage are taxable transactions, but that the miscellaneous
sales are not taxable transactions.
Specifically, the miscellaneous sales which are not taxable are the
charges made for police and accident reports.
The Commission finds that these charges are not sales charges but are
administrative or service fees which are not taxable.
DECISION AND ORDER
The Commission hereby
affirms the sales tax assessment on the special events and equipment rentals at
the XXXXX and on the sales of animals, photocopies, and sales from land fill
salvage. The Commission grants
Petitioner's Petition for Redetermination with regard to the daily admissions,
annual and semi-annual fees, and group use fees to the XXXXX, and with regard
to the miscellaneous sales made by the XXXXX.
The Respondent is
therefore ordered to adjust its records to reflect the decision of the
Commission.
DATED this 16 day of
October, 1987.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner