April
5, 1991 Response from Tax
Commission
January
28, 1991 Letter from XXXXX of
XXXXX
August
16, 1990 Letter from XXXXX of
Tax Commission
July
31, 1990 Letter from XXXXX
of XXXXX
XXXXX
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
which items covered by your service agreements are subject to sales tax.
The
Tax Commission policy is to refer such requests to the division most qualified
to analyze the request and make recommendations concerning it. As such, your request was referred to the
Tax Commission's Auditing Division for their analysis and recommendations. The division's recommendation is as follows:
1. The Utah sales tax law imposes tax on the
sale or rental of tangible personal property.
Music service is intangible, therefore, not subject to sales tax when
separately priced. Tax is due on the
sale or lease of equipment and tax is due on the total charge if equipment is
furnished and a combined fee is charged for the equipment and the music
service.
2. Sales or use tax should not be paid on
equipment purchased by XXXXX to be leased to their customers.
Based
upon the facts presented in your letter, we are in agreement with the Auditing
Division's recommendations. Obviously,
if there are deviations from these facts, this opinion may be negated.
If
you do not agree with this determination, you may appeal to the Tax Commission
for a formal hearing. The results of
that hearing would constitute a declaratory judgment and be appealable to the
Utah State Supreme Court. A Notice of
Appeal Rights is attached.
For
the Commission,
Joe
B. Pacheco
Commissioner
XXXXX
Utah
State Tax Commission
160
East 3rd South
Salt
Lake City, UT 84134
Dear
Mr. XXXXX:
Thank
you for taking the time on the telephone to clarify the sales and use tax
questions that we have.
I'm
enclosing a copy of our current service agreement for your inspection. In our
files we have service agreements which are somewhat different from companies
that we have purchased in the past. The enclosed agreement, however, is the one
we are currently using.
I
am also enclosing a letter dated July 31, 1990 to Mr. XXXXX and his response
dated August 16, 1990 with the answers to our July 31, 1990 letter.
The
question we have is in regards to "Furnished Equipment" that remains
the property of XXXXX.
We
have already clarified in the August 16, 1990 letter that the equipment (SCA
& DBS receivers) are part of the "service" and the use taxes are
to be paid on this equipment as ownership never changes.
We
have been taxing the "Furnished Equipment" on a monthly basis. The
new contention that has been raised is that this is incorrect and we should pay
the "use tax" only. This equipment, like the "service",
remains the property of XXXXX for the duration of the Agreement.
We
are requesting a written clarification of the law and the guidelines
established to ensure that we are in compliance with the State law.
Your
prompt attention to this matter will be greatly appreciated as we are anxious
to start the new year by billing all of the State taxes correctly.
Sincerely,
XXXXX
XXXXX,
President
XXXXX
Dear
Mr. XXXXX:
In
response to your letter of July 31, 1990, the separate charge for receiving a
radio signal is not subject to sales tax. There has been no sale of tangible
personal property or other service taxed under the statutes.
It
is true that where equipment is leased and there is a single charge for
equipment and the music signal, the total amount is taxable.
I
have processed your claim for refund for tax you collected erroneously from
XXXXX, which you should remit to them when received.
Respectfully,
XXXXX
Managing
Auditor
Sales
and Use Taxes
Telephone
No. (801)XXXXX
Mr.
XXXXX
State
Tax Commission (Audit Division)
Heber
M. Wells Building
160
E. 300 S.
Salt
Lake City, Utah 84134
We
recently received a letter from XXXXX (enclosed) requesting a tax refund with
interest because of over collection of the State's sales tax.
We
are writing you at the request of Mr. XXXXX and after having a telephone
conversation with Mr. XXXXX in your office.
XXXXX
is the local XXXXX affiliate and we deliver a music program signal to our
subscribers via a private radio signal or via a satellite antenna. The
customers may own the equipment, or in many cases, they lease the equipment
from us.
Current
agreements have the music service fee listed separately from the leased
equipment fees. We have been charging taxes on the music fees and equipment
lease fees even though they are listed separately on our current service
agreement.
Older
agreements from previous owners, list the music and equipment as one charge. If
this is the case, we have been told previously by your office, that the total
amount should be taxed.
The
issue that we would like you to clarify is whether or not the music service
(XXXXX) should be taxable. Mr. XXXXX, who apparently worked in your office,
says XXXXX is like the cable company and should not be taxed.
We
are requesting a written clarification of the issue and guidelines established
so that we are billing and collecting taxes as they should be.
If
you have any questions, then please feel free to call me. As we need to respond
to our subscriber's question in a timely manner, your prompt attention will be
appreciated. We are also enclosing a claim form that XXXXX sent to us for the
refund with interest. If it is correct to refund the money, then please process
the form.
Sincerely,
XXXXX
President
XXXXX