August
15, 1991 Response from Tax
Commission
July
8, 1991 Letter from XXXXX
XXXXX
Re:
Advisory Opinion - 900 Numbers
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on the
taxability of fees collected for the use of 900 telephone lines.
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 recommendation. The division's recommendation is as follows.
1.
The sales tax law imposes tax on amounts paid to telephone corporations, with a
specific exemption for interstate telephone service. The purchase of telephone
service for resale is exempt because tax will be collected on the service of
the end user.
2.
Under the "joint venture" agreement, the customer will be billed by
his own telephone company for placing a 900 call. The telephone company must
collect sales tax on the amount charged to the customer. The remittances by the
telephone company to the service bureau, the service bureau to Mr. XXXXX and
from Mr. XXXXX to the joint venture party are not taxable. These payments are
exempt as resale transactions.
3.
The monthly amounts paid by the individual signing a "rental"
agreement, such as in the example $395, is a resale transaction and is not
taxable. The amount the customer pays his own telephone company is taxed by the
telephone company. The fees coming back from the telephone company to the
service bureau, to Mr. XXXXX and to his rental customer are not subject to tax
or eligible for any kind of tax credit.
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 and a copy of the Utah Taxpayer Bill of Rights are
attached.
For
the Commission,
Joe
B. Pacheco
Commissioner
XXXXX
Dear
Mr. XXXXX:
Per
XXXXX's suggestion, I am asking for an advisory opinion on the application of
sales and use tax on the rental and commission charges I anticipate charging in
my business.
I
have bought the right to use several
1-900 numbers from the XXXXX in XXXXX, CA.
This was a one-time fee for three such lines. I may purchase other lines as necessary from XXXXX.
The
rights to these lines include the ability to rent the lines to other
individuals or to undertake joint-ventures with others. In both cases, I and
the other person will split the revenues. In the case of the rental agreement,
the individual will pay a monthly fee as a form of deposit against the revenues
and the rental individual will receive a larger portion of the revenues.
Joint
Venture
For
example, a radio station wants to use a 1-900 number for some sort of contest.
Since we could expect a good response in calls due to their advertising ability
we would enter into a joint venture. The radio station would not pay any
monthly "rent." Each person who calls the 1-900 number would be
billed $2.00/min/call (collected by the phone company).
The
phone company sends $1.50/min/call to the service bureau (XXXXX). The service
bureau will send me $1.25/min/call. I would then send to the radio station
(within 5 days of receipt of the money) their portion of the revenues along
with a copy of the detailed listing of calls (provided to me by the service
bureau).
In
this case, there are no "fees" or charges for use but rather a
splitting of the revenues. No money is paid by the radio station to me.
Rental
For
companies/individuals who want a 1-900 number but whom we want to guarantee a
minimum income, we would enter into a rental agreement. The individual would
sign a rental agreement and pay $395/mo in advance to use the line. We would
then split the revenues with the individual on the following scale:
$1.15/min/call to the individual $.10/min/call to me.
Again
the $395 is to guarantee a minimum income for me. I, therefore, would actually
pay the individual $l.25/min/call (keep nothing myself) for the first $500 in
revenues generated. Thereafter, I would Pay $1.15/min/call. This is an added
bonus to the customer. The idea is that the customer ends up paying nothing for
the line as long as it is profitable for both of us. In effect, we simply split
the revenues if it is Profitable. If it is not profitable, the individual will
likely discontinue the 1-900 line.
Conclusion
Please
advise me on the applicability of sales and use tax on the "charges"
in my business. I have enclosed copies of the agreements for use in joint
ventures and rental arrangements (forms provided by XXXXX). All of these forms and
full information is provided in a business start-up kit sold by XXXXX. They are
located in XXXXX, Utah in the XXXXX business park.
Thank
you for your assistance.
Sincerely
,
XXXXX