BEFORE THE STATE TAX
COMMISSION OF UTAH
_____________________________________
XXXXX
Petitioner, :
v. : INFORMAL DECISION
AUDITING
DIVISION OF THE : Appeal No. 87-0901
UTAH STATE TAX COMMISSION, : Account
No. XXXXX
Respondent. :
_____________________________________
STATEMENT OF CASE
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.
FINDINGS
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.
DECISION AND ORDER
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.
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