00-008
Response April 26,
2000
REQUEST LETTER
February 28, 2000
Dear Ms. Reese:
Our company is anticipating bidding a project in the CITY, UT area. The project consists of outside plant construction for COMPANY B. We would like to request as advisory opinion as to whether our revenues are subject to sales tax. It is our understanding that generally labor is not taxed, therefore we would not owe sales tax on our revenues in your state. Listed below is a general description of the labor services our company performs.
COMPANY is a cable television construction company. In the course of its nationwide business, COMPANY usually contracts with local franchisees of COMPANY B for the installation of cable television systems. COMPANY constructs or upgrades a system for the franchisee, and also performs certain maintenance on existing systems.
COMPANY typically installs wire or fiber optic cable on poles owned by a power company or a telephone company, subject to an agreement with the utility company. The wire is owned by the franchisee, not COMPANY. The franchisee supplies the wire and all other materials, and COMPANY supplies the labor and installation expertise. These installation activities do not involve "drops to homeowners."
I have spoken with NAME regarding this issue and he has indicated that our revenues would be exempt from sales tax. COMPANY will accept NAME'S determination as factual unless we hear otherwise from you.
If you have any questions or require any further information, please feel free to contact me at the number listed below
Sincerely,
NAME
RESPONSE LETTER
April 26, 2000
NAME
RE: Taxation of Installation Services
Dear NAME,
You have requested an advisory opinion concerning the taxability of certain services performed by COMPANY. (COMPANY@) for cable television providers. You state in your letter that COMPANY installs wire or fiber optic cable on poles owned by power or telephone companies. COMPANY does not supply the wire, installation materials, or other personal property used in the installation, as these materials are supplied by the cable television providers. In addition, COMPANY'S installation activities do not involve "drops to homeowners," which we understand to be the installation of wire or cable from the transmission lines or delivery system into the cable subscriber=s home. Lastly, you indicate that COMPANY also performs Acertain maintenance on existing systems.@
Installation of wire or fiber optic cable. You install wire or fiber optic cable onto poles owned by power or telephone companies. The Commission has previously found that telephone towers and power transmission towers, including poles, are considered real property for sales tax purposes. Services to attach personal property, such as wire and fiber optic cable, to real property are nontaxable transactions, whether or not the wire and fiber optic cable become part of the real property. Accordingly, the installation services performed by COMPANY, as described above, are not subject to sales tax in Utah.
Maintenance services. You also state that COMPANY performs maintenance on existing systems. For purposes of this opinion, we assume these existing systems are wires and fiber optic cables already attached to poles owned by telephone and power companies. In Utah, Aservices for repairs or renovations of tangible personal property@ are taxable transactions. Utah Code Ann. '59-12-103(1)(g). Accordingly, if the wires or fiber optic cables that are attached to the poles are considered personal property after their attachment, COMPANYS maintenance services would be taxable. However, the Commission generally considers wires and cables attached to telephone and power transmission poles to have become part of the realty. Based on that understanding and without facts indicating otherwise, we would consider these systems to be real property. Accordingly, COMPANYS maintenance services on these systems would not be taxable.
If you have any other questions, please contact us.
For the Commission,
Marc B. Johnson
Commissioner
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