95-0894 & 95-0895

Sales Tax

Signed 4/17/96

BEFORE THE UTAH STATE TAX COMMISSION

____________________________________

XXXXX,

Petitioner, : ORDER

:

v. : Appeal Nos. 95-0894

: 95-0895

CUSTOMER SERVICE DIVISION OF : Account Nos. XXXXX

THE UTAH STATE TAX COMMISSION, :

:

Respondent. :

_____________________________________

STATEMENT OF CASE

This matter came before the Utah State Tax Commission for an Initial Hearing pursuant to the provisions of Utah Code Ann. §59-1-502.5, on XXXXX. Jane Phan, Administrative Law Judge, heard the matter for and on behalf of the Commission. Present and representing Petitioner were XXXXX and XXXXX. Present and representing Respondent were XXXXX, Assistant Attorney General, and XXXXX of the Customer Service Division.

Petitioner is appealing the denial of his request for a refund of the Tourism, Recreation, Cultural and Convention Facilities Tax ("Tourism Tax") for the period of XXXXX through XXXXX. Additionally, Petitioner requests an exemption from the Tourism Tax for the fourth quarter of XXXXX and for periods going forward.

APPLICABLE LAW

The Utah Legislature has allowed the Counties to impose Tourism Tax of not more than 1% of all sales of prepared foods and beverages that are sold by restaurants. (Utah Code Ann. §59-12-601 & §59-12-603(1)(b).)

For the purposes of this section the Utah Legislature provided that "restaurant" includes any coffee shop, cafeteria, luncheonette, soda fountain, or fast-food service where food is prepared for immediate consumption. "Restaurant" does not include any retail establishment whose primary business or function is the sale of fuel or food items for off-premise, but not immediate, consumption. (Utah Code Ann.59-12-602 (4).)

DISCUSSION AND ANALYSIS

The facts in this matter were not presented to be in dispute. At issue were the legal questions of whether the sales at Petitioner's business were lawfully subject to the Tourism Tax and if they were not lawfully subject whether Petitioner is entitled to a refund of the tax paid for the period in question.

Petitioner's businesses, the XXXXX and the XXXXX, are both taverns located within XXXXX. XXXXX imposed the Tourism Tax, as allowed by Utah Code Ann. §59-12-603, effective XXXXX. Petitioner collected and remitted the Tourism Tax to the State Tax Commission during the refund period on sales at these two establishments. Petitioner's establishments serve some limited food items as well as beverages. The food items are chips, peanuts, beef jerky, and gum. It also sells Rolaids, Certs, Alka Seltzer and T-shirts.

Petitioner asserts that his businesses are not subject to the Tourism Tax because they are not restaurants. Petitioner's representatives point to the limited food items sold in the establishments. They state that the establishments do not have kitchens and do not prepare any food by heating, warming or chilling. Petitioner's representatives point to the definition of "restaurant" for the purpose of the imposition of the Tourism Tax as set out in Utah Code Ann. §59-12-602(4). They state that Petitioner's establishments do not come within this definition.

Further, Petitioner's representatives think it is unfair that other types of establishments, like movie theaters, are exempt from the tax.

Respondent's position is that Petitioner's establishments are restaurants for the purposes of administering the tax and are therefore subject to the tax. Respondent's representative states that the definition of restaurant set out in Utah Code Ann. §59-12-602 (4) is not all inclusive, that the universe of statutorily defined restaurants clearly extends beyond those specifically listed in the statute. Respondent also states that the Tax Commission has issued several Tax Bulletins to clarify the Tourism Tax including Tax Bulletin 11-92 which specifically includes taverns within the definition of restaurant and Tax Bulletin 2-94 which clarifies the imposition of tax on the sale of alcoholic beverages and set ups.

Respondent further states that the ambiguity and vagueness of the statute gives the Tax Commission the authority to interpret and apply the meaning of "restaurant" and "prepared for immediate consumption." In support of this position Respondent cites the decisions in Ferro v. Dept. of Commerce, 828 P.2d 507, 510-11 (Utah App. 1992), and Wells Fargo Armored Serv. Corp. v. Public Service Commission of Utah, 626 P.2d 450 (Utah 1981).

Respondent's representative acknowledges that the statute as written, exempting certain establishments like movie theaters, may result in discriminatory treatment. He states that exempting theaters and not exempting Petitioner's establishments is not illegally discriminatory.

However, Respondent's representative states that even if Petitioner is now found to be exempt he is not entitled to a refund because he should have requested an exemption at the time the tax was imposed. Tax Bulletin 8-91, effective July 1, 1991, states, "Vendors of food and beverages prepared for immediate consumption who believe they are not subject to the tax may apply to the Tax Commission, by letter, for exemption from this tax." Further, the tax was actually collected from the customers of the establishments so any refund should go to the customers, not Petitioner. Respondent points out that Petitioner has provided no plan for identifying who the customers were and how much they paid of the tax to deliver the refund to them.

DECISION AND ORDER

It has been the position of the Tax Commission that taverns which primarily serve and prepare beverages have been treated as Restaurants for the purposes of imposing the Tourism Tax since the inception of the tax.

Based upon the information presented at the hearing, and the records of the Tax Commission, the Commission finds that the Respondent correctly denied Petitioner's request for a refund of Tourism Tax paid for the period of XXXXX through XXXXX. Further, Petitioner is not exempt from the Tourism Tax for the fourth quarter of XXXXX.

This decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:

Utah State Tax Commission

Appeals Division

210 North 1950 West

Salt Lake City, Utah 84134

Failure to request a Formal Hearing will preclude any further administrative action or appeal rights in this matter.

DATED this 17 day of April, 1996.

BY ORDER OF THE UTAH STATE TAX COMMISSION.

W. Val Oveson Roger O. Tew

Chairman Commissioner

Joe B. Pacheco Alice Shearer

Commissioner Commissioner

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