00-025

Response August 23, 2000

REQUEST LETTER

June 7, 2000

We are a company that provides automated hiring services to retailers. At this time, we are looking at expanding into additional states and would like to get an opinion on the application of sales and use tax based on the service outlined below.

Here is a very basic summary:

We supply our customers with a screen phone that allows them to access our service. The title to, and risk associated with, this piece of equipment remains with us. The cost of the equipment is minimal in comparison to the revenue stream of the services (<5%.)

Job seekers enter a prospective places of employment and are directed to the screen phone units. The applicant fills out the information requested on the screen, then the data is transmitted to our processing center in STATE. There, the data is analyzed by software developed by our engineers and housed on our servers. A completed job application and a number of other reports are then transmitted back to the hiring manager at the store location via fax or e-mail.

The revenue stream consists of a fixed monthly fee charged to the retailer. All data is unique to the prospective applicant and is not distributed to anyone other than the retailer paying for the service.

In the future, we will be able to provide this service without the use of the screen phones. Instead, we will rely on a web-based application accessed through a link on either our home page or the retailers' home page.

Please feel free to contact me with any questions concerning the service at #####. Thank you for your cooperation.

RESPONSE LETTER

August 23, 2000

RE: Taxability of Hiring Services

Dear NAME,

You have requested an advisory opinion as to whether sales and use tax should be imposed on charges for hiring services provided by COMPANY (ACOMPANY@). COMPANY contracts with large Utah retailers to assist them in their hiring of employees. As you mentioned by telephone, each customer pays COMPANY a monthly fee for which COMPANY will process up to ##### applications for a customer and prepare reports based on the applicants= responses. To provide these services, COMPANY supplies each customer with a screen phone on which an applicant answers a series of questions. The applicant=s data is then electronically transmitted to COMPANY=s processing center, and within ten minutes, COMPANY=s customer electronically receives an application form and a personality screening form derived from that applicant=s responses. Within a week to a month, COMPANY=s customer receives a background check and criminal history, if any, relating to that applicant.

COMPANY=s charge for these services, as described above, is not a taxable transaction. Though the customer receives from COMPANY tangible personal property (i.e., the forms and reports), the essence of the COMPANY=s transactions with its customers is for the services to prepare the forms and reports and the information contained in them, not for the tangible personal property by which the information is delivered. Accordingly, COMPANY=s charges are not subject to sales tax. In addition, even though the customer receives physical possession of a screen phone from COMPANY, COMPANY retains ownership of the screen phone and the customer=s only benefit from the phone is to receive the services and information provided by COMPANY. Accordingly, COMPANY=s charges would not be characterized as the taxable rental or sale of the screen phone to its customers. Instead, COMPANY is considered to Aconsume@ the screen phone while providing its nontaxable services. Accordingly, COMPANY would be liable for any applicable Utah sale or use tax on its purchase of the screen phones.

This response assumes the facts stated above to be correct. Should they be different, our response may also be different. If you have any other questions, please feel free to contact us.

For the Commission,

Marc B. Johnson

Commissioner