BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX, ) FINDINGS OF FACT,
: CONCLUSIONS
OF LAW,
Petitioner, : AND FINAL DECISION
:
v. :
AUDITING
DIVISION OF THE : Appeal Nos. 90-0052 &
UTAH STATE TAX COMMISSION, : 90-1589
Respondent. :
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission for a formal hearing on
XXXXX. Roger O. Tew, Commissioner and
Presiding Officer, Joe B. Pacheco, Commissioner, and Paul F. Iwasaki,
Administrative Law Judge, heard the matter for and on behalf of the
Commission. Present and representing
the Petitioner were XXXXX and XXXXX, Attorneys at Law. Present and representing the Respondent was
XXXXX, Assistant Utah Attorney General.
Based
upon the evidence and testimony presented at the hearing, the Tax Commission
hereby makes its:
FINDINGS OF FACT
1. The tax in question is sales tax.
2. The period in question is XXXXX through
XXXXX.
3. The Petitioner operated a XXXXX which
carried passengers between XXXXX and XXXXX counties. The XXXXX ran from XXXXX, Utah to XXXXX which is located in
XXXXX, Utah.
4. Approximately XXXXX percent of fares sold on
the XXXXX were for trips that originated in XXXXX. Of the XXXXX approximately XXXXX were round trip fares.
5. From approximately XXXXX through XXXXX the
Petitioner remitted sales tax on fares.
The tax was calculated based upon the gross receipts from such fares
multiplied by the applicable tax rate.
The tax was not separated from the fare when charged to the
customer. In XXXXX the Petitioner
stopped remitting the sales tax. The
Petitioner had conducted an informal survey of other recreational railroads in
surrounding states and, as a result of that survey, believed itself to be
exempt from sales tax receipts.
6. Food and beverages were sold on the
XXXXX. From XXXXX to XXXXX, the
Petitioner and/or its predecessors had remitted sales tax on the food and
beverages sold on the XXXXX. The amount
of tax remitted was calculated in the same manner as the tax remitted on
fares. Thereafter, the Petitioner
stopped remitting sales tax on sales of food and beverages.
7. In addition to those passengers who
purchased tickets to ride on the XXXXX, other groups of passengers would
charter specific XXXXX on the XXXXX for entertainment purposes.
CONCLUSIONS OF LAW
Amounts
paid to common carriers for all transportation are subject to sales tax. (Utah Code Ann. §59-12-103).
All
fares paid for intrastate transportation of persons to common carriers having
established routes are subject to tax, except:
1. Street railway fares;
2. Amounts paid for charter transportation
rendering service only to specific parties with whom a contract has been made;
and
3. Amounts paid for persons traveling in air
commerce. (Utah State Tax Commission
Administrative Rule R865-1936S.)
The
term, "common carrier" includes every railroad corporation. (Utah Code Ann. §54-2-1(8)(a).)
DECISION AND ORDER
In
the present case, the Petitioner claims that the fares charged to ride the
XXXXX are not subject to sales tax and also that it is entitled to a refund of
taxes paid on the sale of food and beverages for three reasons:
1. The railway is an express railway and
therefore exempt under Utah Code Ann. §59-12-104(17);
2. The imposition of sales and use taxes
against the Petitioner constitutes an unlawful discrimination under the
Staggers Rail Act of 1980; and
3. The imposition of sales and use tax against
the Petitioner violates the equal protection provisions of the Utah and United
States Constitution.
With
respect to its first argument, the Petitioner claims that Utah Code Ann.
§59-12-104(17) which exempts from sales tax intrastate movements of freight and
express or street railway fares" effectively exempts the Petitioner from
the imposition of sales tax on its rail fares.
The Petitioner maintains that statutory provision exempts "express
railways" from sales tax. The
Petitioner further argues that "express railway" refers to a railway
that travels from Point A to Point B without stopping.
The
Tax Commission rejects the Petitioner's interpretation of §59-12-104(17). It is clear from the statute that the terms
freight and express are to be read together and refer to the transportation
and/or delivery of goods or small packages and parcels.
The
Petitioner next claims that the Interstate Commerce Commission (ICC) exercises
jurisdiction over the XXXXX and that the Staggers Rail Act of 1980 prohibits
the imposition of any tax that discriminates against the rail carrier which
provides transportation subject to the jurisdiction of the ICC.
The
Tax Commission rejects the Petitioner's argument for two reasons:
1. Section 11503(b)(4) of the Staggers Rail Act
which is cited by the Petitioner as support for its claim that the imposition
of the sales tax upon the Petitioner is a prohibited action under the Staggers
Rail Act does not deal with sales tax.
Section 11503 of the Staggers Rail Act deals with the valuation of rail
transportation property for property tax purposes. There is nothing in that section which would indicate that it
applies to the applicability of sales tax to railways and;
2. Section 10501(b)(1) of the Staggers Rail Act
specifically provides that ICC does not have jurisdiction over the,
"transportation of passengers or property, or the receipt, delivery,
storage, or the handling of property, entirely in a state (other than the
District of Columbia)..."
Here,
clearly, the XXXXX in question operates exclusively within the State of Utah
and therefore is not subject to the jurisdiction of the ICC.
In
its final argument, the Petitioner claims that by imposing the sales tax
requirement upon the Petitioner, the equal protection provisions of the Utah
and United State Constitution's are violated.
Specifically, the Petitioner maintains that by imposing sales tax
requirements on it and not imposing the same requirements on other modes of
transportation such as hot air balloons, river rafts, helicopters, and horse
drawn carriages, the Petitioner is treated differently than other members in
its class.
The
Tax Commission rejects the Petitioner's argument that the Auditing Division has
unconstitutionally applied Utah Code Ann. §59-12-104(18). The Tax Commission finds that the Petitioner
is a common carrier and the amounts paid for transportation on it are subject
to tax. It is that status as a common
carrier that provides the basis for the imposition of sales tax. The other entities cited by the Petitioner
are not common carriers and thus do not belong to the same class as the
Petitioner. Therefore there is no
dissimilar treatment among members of the same class.
The
Commission notes that the Respondent has argued, as an alternative position,
that the sale of fares on the train represented admissions to a place of
amusement, entertainment, or recreation and were thus subject to tax as
provided for by §59-12103(1)(f).
Because
the Commission has already determined the Petitioner to be a common carrier and
thus subject to sales tax, the question of the status of the Petitioner as a
place of amusement need not be decided.
Therefore, the Commission specifically withholds ruling on that issue.
With
respect to those charter fares which were paid for by specific groups pursuant
to contract, the Tax Commission finds that such fares were not subject to sales
tax as provided for by section R865-19S-36 which, in part, states,
[a]ll
fares paid for intrastate transportation of persons to common carriers having
established routes are subject to tax, except: ....
2. Amounts paid for chartered transportation
rendering service only to the specific parties with whom a contract has been
made....
The
Commission is aware of the economic hardship placed upon the Petitioner by this
decision. That situation however is one
of the Petitioner's own making. As
found by the evidence presented, the Petitioner had been following the law
correctly when it had been remitting the sales tax on fares. The Petitioner
thereafter deliberately chose to stop remitting the tax based upon its own
conclusion that such was not required.
It did so without seeking advice from the Commission as to the correctness
of its action when it could easily have done so through a request for
declaratory judgment. Indeed there was
no evidence that the Petitioner sought the advice of its counsel or accountants
when the decision to stop remitting the tax was made.
Based
upon the foregoing, the Tax Commission affirms the determination of the
Auditing Division, however, to the extent it has not already done so, orders
the Auditing Division to remove from the audit the deficiency assessed on those
fares which represented chartered fares.
It is so ordered.
DATED
this 26th day of November, 1991.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H.
Chairman Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco S.
Blaine Willes
Commissioner Commissioner