87-0901 - Sales





            Petitioner,                                                         :

v.                                                                                 :           INFORMAL DECISION

AUDITING DIVISION OF THE                                :           Appeal No. 87-0901

            UTAH STATE TAX COMMISSION,            :           Account No. XXXXX

            Respondent.                                                     :



            This is an appeal to the Utah State Tax Commission from a decision of the Auditing Division of the Utah State Tax Commission (Respondent) to deny Petitioner's application for exemption from sales tax on tickets sold for a fund raising effort.  An informal hearing was held on XXXXX in the offices of the Utah State Tax Commission.  Jerry E. Larrabee, Tax Appeals Supervisor, heard the matter for the Tax Commission.  XXXXX, attorney at law, XXXXX, Managing Auditor, represented the Respondent.


            The XXXXX (XXXXX) is a nonprofit corporation which is exempted from federal income tax under the provisions of the IRS Code Section 501(c).  The purpose of XXXXX is to act as an umbrella organization to coordinate twenty veteran and military organizations in the State of Utah.  XXXXX is currently coordinating efforts for the establishment of the state veterans cemetery.  Half of the funding will be provided by the federal government and the matching funds will be provided by veteran's organizations and from private donations.  See, Utah Code Ann. 71-7-3 (1953). As part of its fund raising effort, XXXXX arranged for XXXXX to appear at the XXXXX.  Petitioner stated that XXXXX lost money on this performance.  Petitioner requested that these ticket sales be treated as sales under the exemption provisions of the Sales Tax Act in the same manner as ticket sales for XXXXX and other charitable organizations.  Petitioner cited Youth Tennis Foundation vs. Tax Commission, 554 P.2d 220 (Utah 1976).  Utah Code Ann.59-12-104(8) (1953) exempts from sales and use taxes "sales made to or by religious or charitable institutions in the conduct of their regular religious or charitable functions and activities."  These sales of tickets to a XXXXX concert is not a sale by Petitioner "in the conduct of" Petitioner's regular charitable functions and activities.  Petitioner's charitable purpose is not to organize concerts. In contrast, the sale of tickets to a tennis tournament by XXXXX, the sale of ballet tickets by XXXXX, and the sale of opera tickets by XXXXX are sales by these charitable institutions in the conduct of their regular charitable functions.  Respondent provided several criteria for guidelines to determine if a charitable institution qualifies for a sales and use tax exemption.  Criteria #6 states:

            At least one-third (33 1/3%) of funds for operating expenses and capital improvements must come from donations.  Government grants or subsidies are considered "donations" for the purpose of this requirement.  Money raised from dues, tuition or the sale of goods, services or entertainment are NOT considered as "funds from donation" for this one-third requirement, even though the receipt or admission ticket is called a "contribution."  Petitioner did not provide sufficient evidence that at least one-third of its funds for operating expenses and capital improvements came from donations.  These donations must be in cash or in government grants or subsidies but do not include revenue from ticket sales for entertainment such as the XXXXX concert and do not include the donation of services such as architectural services.


            Based on the foregoing, it is the Decision and Order of the Utah State Tax Commission that the application of XXXXX for exemption from sales tax on the sale of tickets to the fund raising effort be denied.  Petitioner is hereby ordered to remit sales tax on the sale of the tickets.  Prompt payment shall avoid the imposition of penalty and interest.

            DATED this 5 day of May, 1988.


R. H. Hansen                                                                Roger O. Tew

Chairman                                                                      Commissioner

Joe B. Pacheco                                                            G. Blaine Davis

Commissioner   Commissioner