January
31, 1992 Response from Tax Commission
December
12, 1991 Letter from XXXXX of XXXXX
XXXXX,
CPA
Re:XXXXX
Vacation Package
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether sales tax, transient room tax and the 1% tourism tax applies to
vacation packages offered by innkeepers which would include a hotel room,
meals, airfare, auto rental, ski passes, horseback riding, green fees, etc. You have posed specific questions which will
be addressed.
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 recommendations are as follows:
1. If a guest is charged a single package price
or daily rate for hotel accommodations, food, airfare, auto rental, ski passes,
horseback riding, green fees, etc. the various taxes apply only to the value of
the items as if they were sold separately.
The customer's billing should indicate that tax has been paid where
appropriate. The internal records of the innkeeper must allocate a reasonable
amount for each of the events and items sold. Room charges must have sales and
transient room taxes applied; meals must have sales and tourism taxes applied;
airfare is not taxable; sales tax and if in a county which has adopted the 3%
tourism tax on vehicle rentals, the 3% tourism tax should be paid to the rental
agency by the innkeeper; sales tax only should be applied to ski passes or paid
by the innkeeper to a separately operated ski resort; sales tax applies to
horseback riding in the same manner as ski passes; golf green fees are not
taxable. If these services are provided in a city which has adopted the 1%
resort communities sales tax, this tax also applies where sales tax does.
2. The answer does not change where the
innkeeper itemizes the guest's billing for specific charges.
3. If the resort adds a 15% service fee, the
service fee must be allocated according to the amount of the various charges
and tax applied if the service is taxable. The 1% tourism tax applies to the
amount allocated for food and beverages.
4. The 1% tourism tax does apply to wine and
liquor sales. Both sales tax and
tourism tax is due on the sale of mixed drinks after deducting sales tax paid
on the liquor to the state liquor store.
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's Bill of Rights are attached.
For
the Commission,
Joe
B. Pacheco
Commissioner
Utah
State Tax Commission
Attention:
Joe Pacheco
160
East 300 South
Salt
Lake City, UT 84134
RE: State taxes to be collected by XXXXX on vacation
"packages"
Dear
Commissioner Pacheco:
As
a follow-up to our recent conversation, would you please give the Tax
Commission's opinion as to the liability for sales tax, transient room tax, and
1% tourism tax, in each of the following fact situations:
I. A tourist purchases a XXXXX vacation
"package" covering the following recreational features: Hotel room,
meals, airfare, auto rental, ski passes, horseback riding, golf passes, etc.
1. If the guest is charged a single price or a
daily rate, should the innkeeper collect transient room tax, sales tax and
tourism tax on the price of the whole package which may include airfares for
flights from out-of-state, meals, drinks and various recreational
activities? If so, the guest could pay
as much as 11.25% tax on the vacation package which would certainly discourage
the travel agent vendors from recommending the sale of these packages for Utah
vacations when comparable packages are available in other states with a lower
total cost due to the Utah taxes.
2. How would your answer change if the billing
to the guest itemizes the specific charges for room, meals, drinks,
transportation, and the various recreational activities? Would this avoid the possible overlapping of
taxes? Would the innkeeper then charge
the guest transient room tax on the room charge only, and sales tax on those
items properly subject to sales tax? To what items would the 1% tourism tax
apply?
3. Would your answer to "2" be the
same if, for simplicity, instead of an itemized billing to the guest, the bill
shows the "package" or daily rate and the innkeeper rubber-stamps the
bill allocating the daily charge to the various services availed of -- so much
for room, so much for food, etc.?
II. If, in addition to the quoted package price,
the resort adds a 15% service charge (which is retained by the resort and not
passed on to employees) should the resort charge transient room tax on the full
service charge? Would it make a difference if the bill was itemized as in
"I-2" above or allocated by rubber stamp as in "I-3"
above? Does the 1% tourism tax apply to
any or all of the service charge on the "package"?
III. Should the innkeeper charge the guest the 1%
tourism tax (§59-12-603) on wine and liquor sales when it does not charge sales
tax because the sales tax has already been collected directly by the State at
the time of purchase at the liquor store?
The
Tax Commission's response to the above questions can have a serious effect on
Utah's ability to compete for tourist business. Your thoughtful consideration
and prompt response will be greatly appreciated.
Sincerely,
XXXXX,
C.P.A.