REQUEST LETTER
01-037
Response: 1/15/02
NAME
ADDRESS
PHONE
Re COMPANY – Request for Advisory Opinion
Our File No: ######
As counsel for COMPAY, doing
business as COMPANY, I have previously petitioned the Utah State Tax Commission
(“Commission”) for a ruling to determine whether certain transactions
associated with the motel, meal and tour operations at COMPANY are subject to
the Utah Sales and Use Tax Act. A copy
of my original request and the Commission’s response thereto are attached for
your convenience.
As you will note from the
Commission’s response, no clear answer was given to the original inquiry. Therefore, I respectfully request an answer
to the question: Is the sale of blocks
of motel rooms, meals and tours to a tour company, at prices less than the
standard rate, a “wholesale sale” for purposes of the Utah Sales and Use Tax
Act (including the transient room tax set forth in Part 3 thereof), where such
room rentals, meals and guided tours are incorporated into a larger tour
package which is then sold to tour participants?
NAME’S letter indicates that the transactions may
not be exempt because the motor coach companies may not be registered in
Utah. Assuming that the companies are
registered in Utah, that exemption certificates have been properly executed by
the motor coach company and that the certificates have been appropriately
delivered to COMPANY’S are the transactions controlled by Utah Code Annotated
Section 59-12-107 (5) and Utah Administrative Code, Rule 865-19S-29, thereby
rendering them “wholesale sales”?
Secondly, several of the
motor coach companies do not maintain offices in, and have little contact with
Utah. Therefore, as a follow-up my
first question, with respect to companies not registered in Utah, I will
appreciate your opinion whether, under the facts outlined below, certain motor
coach companies are exempt from the sales and transient room tax pursuant to
the dormant Commerce Clause, United States Constitution, Article I, Section 8,
clause 3’ 49 USCS Section 14505 (c.f., Complete Auto Transit, Inc., v. Brady,
430 U.S. 274; 97 S. Ct. 1076; 51 L. Ed. 2d 326; 1977 U.S. LEXIS 56 and Oklahoma
Tax Commission v. Jefferson Lines, Inc., 514 U.S. 175; 115 S. Ct.
1331 L. Ed. 2d 261; 1995 U.S. LEXIS 2418); or Utah State Tax Commission
Bulletin 6-01.
The companies at issue are
subject to the following assumptions and limitations:
1.
all companies maintain
their principal place of business in a foreign country or a state other than
Utah;
2.
the companies do not maintain
offices in Utah;
3.
tour packages are
sold/purchased outside Utah;
4.
payment for the tour
package occurs outside Utah;
5.
the tours originate in a
state other than Utah;
6.
the tours include travel
to states other than Utah as part of the overall tour package; and
7.
the facts set forth in
my August 23, 2001 request, with regard to the “wholesale sale” of blocks of
rooms, meals and tours are applicable.
Same Itineraries are attached
for your convenience.
Thank you for your cooperation
in this matter. I look forward to hearing from you.
NAME
RESPONSE LETTER
DATE
NAME
ADDRESS
RE: Request
for Advisory Opinion Concerning the Sale of Accommodations, Meals and Side
Tours to Vacation Tour Packagers
Dear NAME,
We have received your inquiry concerning the application
of sales tax on accommodations, meals, and “side” tours sold by COMPANY to a
vacation tour operator who incorporates these items into a tour package sold to
tour participants. The sale of
accommodations, meals, and “side” tours (such as boat and jeep tours) are
usually taxable under Utah Code Ann. §59-12-103(1). When these various taxable items are combined in a tour package,
the tour participant purchases them as an incorporated unit from the secondary seller
(the tour operator), not the original seller COMPANY). The Commission’s policy is to collect sales
tax on the price charged by the original seller when he or she actually
performs taxable services, such as providing a side tour, or provides taxable
items, such as rooms or meals. Our
policy is not to impose sales tax on any additional price charged by the
secondary seller for his services of combining into a unit package the services
performed by and the items provided by the original seller. You indicate that
you believe the original seller might be considered a wholesaler, so that sales
tax would instead be collected on the entire price charged by the secondary
seller in this instance.
Arguments for your interpretation may be reasonably made,
whereby the secondary seller (the tour operator) would buy the accommodations,
the side tours, and meals tax-free under the resale exemption and then collect
sales tax on the total amount the tour participant is charged for the entire
tour. However, in the tour business,
the Commission believes a different result occurs where the tour participant is
purchasing not only the accommodations, meals, and side tours, but also the
significant services provided by the tour operator in locating, procuring, and
organizing these components and then making the total package available for
sale. When various components of the
tour are not actually performed or provided by the tour operator, we believe it
equitable to distinguish between the sale of the tour operator’s services and
the taxable components purchased as part of the total tour. For this reason, the secondary seller or
tour operator is considered to “consume” the accommodations, meals, and side
tours ticket when providing his or her nontaxable tour packaging service. Accordingly, the tour operator must pay
sales tax, transient room tax, and other appropriate taxes on the taxable items
or services consumed, which requires an original seller, such as COMPANY to
collect and remit taxes on the amounts it charges the tour operator for the
accommodations, meals, and side tours it provides or performs.
Were
the tour operator the party actually providing or performing the
accommodations, meals, and “side” tours in Utah, it would need to be registered
in Utah and collect sales tax on the entire amount it charged the tour
participant, unless some other exemption applied. We hope this response more clearly addresses your specific
concerns, but please contact us if you have any other questions.
For
the Commission,
Marc
B. Johnson
Commissioner
MBJ/KC
01-037