REQUEST LETTER

 

03-013

 

NAME

ADDRESS

PHONE

FAX

 

Re: Account No. ######

 

COMPANY will soon offer a new product consisting of a service to which COMPANY will lease long distance telephone capacity and allow our clients to use that capacity to communicate with us electronically. COMPANY currently sells, rents, and services computer equipment. COMPANY has salesman; some of whom may live in your state and others who travel into your state to make sales calls on clients and potential clients. COMPANY also has repair personnel; some of whom may live in your state and others who travel into your state to repair tangible personal property sold by COMPANY. COMPANY currently bills and remits the proper sales tax on its taxable sales and services.

 

COMPANY requests a written opinion on which it can rely should it be audited on whether the telephone connection sales to clients in your state are subject to your sales or use tax. These are the facts.

 

·        The connection is made with the use of purchased long distance telephone capacity and it available only to our clients; not the general public. COMPANY purchases the long distance capacity from telecommunications companies such as Bell South, Qwest, and Verizon. COMPANY itself is not a telecommunications provider. We simply purchase the long distance capacity, pay the appropriate telecommunications taxes to the provider, and charge out clients for using that capacity. The servers to which the clients connect are located in CITY or CITY , STATE.

·        COMPANY will offer this service for a monthly fee with no tangible personal property bundled with this charge. COMPANY will occasionally sell tangible personal property in connection with the set up of the service, but understands that sales of tangible personal property are always taxable and will charge the appropriate sales tax.

 

If you have any questions regarding this matter, please call me at PHONE.

 

Sincerely,

NAME

Tax Accountant

 

RESPONSE LETTER

 

August 14, 2003

 

NAME

ADDRESS

PHONE

 

RE: Private Letter Ruling Request – Is Connection to Long Distance Telephone Capacity Considered a Taxable Telephone Service?

 

Dear NAME

We have received your request for a private letter ruling concerning the sale of long distance telephone capacity by COMPANY to its Utah customers. In a recent telephone conversation, you informed us that COMPANY sells services to automobile dealerships that enable them to locate specific vehicles at other dealerships throughout the country. This vehicle information is kept in a database that may only be accessed through COMPANY servers, which are located in STATE. To have access to this database, a member dealership pays COMPANY a monthly membership fee. A member dealership can then access the database by paying COMPANY a per minute charge to use the long distance telephone capacity that COMPANY previously leased from a third-party long distance provider. Under these circumstances, you ask whether COMPANY charges for use of its long distance telephone capacity are taxable in Utah as charges for telephone services.

 

Pursuant to Utah Code Ann. §59-12-103(1)(b), telephone service that originates and terminates within Utah is subject to taxation. Because the long distance telephone access provided to COMPANY customers only terminates in SATE, never in Utah, its sale by COMPANY at a per minute charge is not subject to Utah sales and use tax.

 

COMPANY also charges its members a monthly fee to access its database. The Commission considers such a transaction to be a non-taxable sale of services. However, should the membership fee also entitle a member dealership to receive or download computer software, the transaction might be considered the taxable sale of tangible personal property.

 

This ruling relates to the facts as stated above. Should they be different, our response might also be different. Please contact us if you have any other questions.

 

For the Commission,

 

 

 

Marc B. Johnson

Commissioner

 

MBJ/KC

03-013