REQUEST LETTER

00-027

Response 1/26/01

Dear,

I would like your opinion on sales tax exemption for SIC Code 4111 pertaining to the following:

Olympic Service. A company contracts with State Shuttle Service to provide transportation for the entire 3 week Olympic period to provide transportation for their employees. Transportation will be on a scheduled route from event to event but will not be the same route every day.

I look forward to your response.

Sincerely yours,

RESPONSE LETTER

January 26, 2001

RE: Sales Tax Exemption Under Section 59-12-104(16)

Dear Mr,

The Utah State Tax Commission has received your request for an advisory opinion concerning an exemption from sales tax under Utah Code Ann. '59-12-104(16). In your request letter, you indicated that State Shuttle Services may be retained to transport passengers to various Olympic venues over a three week period. By telephone, you stated that you would be contracting with various Olympic business sponsors to transport their employees, guests, and customers between Olympic venues located in County, County , County, County, and County.

Exemptions. Before discussing your request specific to Section 59-12-104(16), we note that there are two other exemptions provisions which do not apply to your situation. As these proposed transactions would not involve the City Organizing Committee, that organization=s sales tax exemption as a charitable institution, as provided in Section 59-12-104(8)(b), does not apply. These transactions would also not qualify for the Section 59-12-104(46) sales tax exemption for the transportation of an employer=s employee to or from the employee=s primary place of business. The Olympic venues are not a sponsor=s employee=s Aprimary place of business,@ and persons other than employees would be transported, as well.

However, Section 59-12-104(16)(b)(ii) does apply to your circumstances, with limitations. That section exempts from sales tax Aintrastate movements of . . . passengers . . . transported by an establishment described in SIC Code 4111 of the 1987 Standard Industrial Classification Manual . . . , if the transportation originates and terminates within a county of the first, second, or third class.@

The 1987 Standard Industrial Classification Manual defines SIC Code 4111 as:

Establishments primarily engaged in furnishing local and suburban mass passenger transportation over regular routes and on regular schedules, with operations confined principally to a municipality, contiguous municipalities, or a municipality and its suburban areas. Also included in this industry are establishments primarily engaged in furnishing passenger transportation by automobile, bus, or rail, to, from, or between airports or rail terminals, over regular routes, and those providing bus and rail commuter services.

In essence, SIC Code 4111 and Section 59-12-104(16)(b)(ii) provide the following requirements for this sales tax exemption:

(1) The transportation company must be an establishment Aprimarily engaged@ in furnishing:

(a) mass passenger transportation over regular routes and on regular schedules with operations confined to a municipality, contiguous municipalities, or a municipality and its suburban areas;

(b) passenger transportation by automobile, bus, or rail, to, from, or between airports or rail terminals, over regular routes, and those providing bus and rail commuter services;

and

(2) The transportation must originate and terminate within a county of the first, second, or third class.

SIC Code 4111 Establishment Requirement. By telephone, you stated that State Shuttle Services was founded approximately one year ago to provide, by shuttle bus, commuter transit service to and from the Utah Transportation Authority=s TRAX depots. You contract with large employers to shuttle their employees between their work locations and the TRAX depots, with shuttles running every 15 minutes during normal commuting times. You have not collected sales tax on your charges for these services, believing that your company is an establishment described in SIC Code 4111. Because your company furnishes passenger transportation by bus to and from rail terminals over regular routes, we agree that it is an establishment described in SIC Code 4111.

However, during the three week Olympic period, you would be providing shuttle service between Olympic venues located in County, County, County, County, and County. This service would not involve transportation to an airport or rail terminal. Also, as these venues are relatively far apart, there is a question of whether this non-airport and non-rail terminal transportation service would be Aconfined to a municipality, contiguous municipalities, or a municipality and its suburban areas,@ as required in SIC Code 4111. Accordingly, this temporary service between Olympic venues may not constitute a service described under SIC Code 4111.

Nevertheless, even if your transportation service between Olympic venues is not described under SIC Code 4111, this temporary service would not disqualify State Shuttle Services from being classified as an SIC Code 4111 establishment. So long as Utah Shuttle Services is Aprimarily engaged@ in furnishing transportation by bus to and from TRAX depots over regular routes, a temporary deviation from the ordinary course of business, such as the contract to provide transportation services to Olympic venues during the Olympics, will not by itself create a requirement that your company collect sales tax on such services. State Shuttle Services would still be classified as a SIC Code 4111 establishment and the Section 59-12-104(16) sales tax exemption may still apply on all its transportation, even if State Shuttle Services, for this three week period, provides services that are not described in SIC Code 4111.

First, Second, or Third Class County. Finally, Section 59-12-104(16)(b)(ii) adds that the transportation services must Aoriginate and terminate within a county of the first, second, or third class.@ The Aclass@ of a county is based on population. Utah Code Ann. '17-50-501 specifies that a county having a population of more than 18,000 will, at a minimum, be a county of the third class. Included is a list of Utah=s 29 counties that shows the population and Aclass@ of each county.

Your temporary Olympic shuttle service would involve venues located in County, County, County, County, and County. Only County, which is of the fourth class, does not qualify here. Accordingly, your company, as an SIC Code 4111 establishment, may provide tax-free temporary Olympic shuttle service that originates and terminates in County, County, Weber County, or County, but not any shuttle service that originates or terminates in County. However, shuttle service that includes County as an interim stop, but originates and terminates in one of the other counties would still be tax-exempt.

This opinion is based on the facts described above. Should the actual facts be different, our opinion might also be different. Please contact us if you have any other questions.