January
31, 1992 Response from Tax
Commission
December
23, 1991 Letter from XXXXX of XXXXX,
CPA
XXXXX
Re:
Advisory Opinion -XXXXX
Dear
Mr. XXXXX:
This
letter is in response to your recent request for a Tax Commission ruling on
whether the monthly XXXXX charges are subject to sales or use tax. The charge
is for the lease of a computer terminal, the use of XXXXX software and the
receipt of XXXXX information. XXXXX's invoice to its customer is a single
monthly charge labeled "terminal rental." Tax is collected on the total charge.
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. Utah Code Section 59-12-103(1)(k) imposes
sales or use tax on rentals or leases of tangible personal property. XXXXX's rental
of a computer terminal and software is taxable.
2. A separate charge to receive information or
data via a terminal is not a taxable service. If non-taxable services are
separately billed from taxable services or rentals, the non-taxable amount is exempt.
Since XXXXX does not distinguish in its billings between hardware, software or
information services, the total amount is taxable.
3. The difference in the treatment for XXXXX
and XXXXX is that XXXXX furnishes the terminals without rental charge and XXXXX
rents the equipment and software.
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
160
East Third South
Salt
Lake City, UT 84134
Attn:
Mr. Joe Pacheco
RE:XXXXX
Dear
Mr. Pacheco:
It
has recently come to our attention that the Utah Tax Commission has issued an
advisory opinion to XXXXX (XXXXX) stating that XXXXX, providing information to
its customers, in a way not unlike XXXXX, would be exempt from charging Utah
Sales Tax, but would be liable for Use Tax based on the cost of equipment in
use in Utah by its customers.
XXXXX
provides numerous forms of financial information and data to customers
nationwide, including Utah. Its customers are mostly banks, brokerage
organizations and other financial institutions. The information is received by
customers from its central mainframe computers in New York by way of electronic
impulses transferred interstate over telephone lines. The customer receives the
impulses on special equipment that is "leased". The equipment generally consists of a
controller which receives the impulses and is attached to the telephone lines,
a keyboard which is used to access the database by entering certain commands
and a monitor on which the information appears or is displayed. This equipment
can be used only for receiving the information, it has no other function or
use.
The
XXXXX Agreement with its customers refers to "lessor" (XXXXX) and
lessee (customer) and states that XXXXX will provide to the lessee the equipment
and services described and enumerated (the information and XXXXX software
etc.)XXXXX's invoice labels the charge "Terminal Rental" and adds
Utah sales tax to the rental. The invoice does not distinguish between
hardware, software or information services.
Based
on the above, kindly determine the tax liability of the monthly XXXXX charges.
Should
additional information be needed, please contact me at the address above.
Very
truly yours,
XXXXX
for
XXXXX