Response
August 28, 1992
August
28, 1992
XXXXX
Re: Advisory Opinion - Leased Equipment
Dear
XXXXX:
Your
request for an advisory opinion on how to tax equipment which is leased both
with and without an operator was referred to the Auditing Division for their
analysis.
It
is the division staff recommendation that:
1.
XXXXX's understanding of provisions contained in rule R865-19-32S is correct.
2. If equipment is purchased for the purpose of
leasing it both with and without an operator, the equipment should be purchased
tax-free. Tax should then be collected
on rentals without an operator. In the
case of rentals with an operator, no tax should be collected from the customer,
but tax should be accrued and paid by the lessor based upon the rental rate
without an operator, since the lessor becomes the consumer of the equipment.
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 judgement 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.
To
arrange for Americans with Disabilities Act accommodations, please contact the
Tax Commission at (801) 530-6920, (801) 530-6077 or TDD (801) 530-6269 allowing
three working days notice.
For
the Commission
Joe
B. Pacheco
Commissioner
XXXXX,
Administrative Assistant
Utah
State Tax Commission
Heber
M. Wells Building
Salt
Lake City, Utah 84134
Re: Request for opinion on sales tax issue
Dear
XXXXX:
Per
instructions by other personnel in the tax commission, I was told to direct a
letter such as this to you to request assistance in obtaining advise on a sales
tax matter which affects one of my clients.
My
client is in the business of renting and leasing motion picture and tv
production equipment to various production companies throughout the United
States. In some cases the equipment
needs qualified personnel from my client's office to operate the equipment, and
in other cases, the equipment is rented directly to the production company
without supervision or personnel.
Per
the regulations of sales tax law, rentals of equipment with the operating
personnel from the rental company is not subject to sales tax. Rental of equipment without personnel is
subject to sales tax. As described
elsewhere in the regulations, equipment purchased that will be subject to sales
tax under rental is not subject to sales tax at time of purchase, and equipment
purchased that is not subject to sales tax under rental (with qualified
personnel accompanying) is subject to sales tax at the time of purchase.
My
client has invested hundreds of thousands of dollars of equipment for such
purpose and in most cases, has paid sales tax.
He does have equipment which plays both roles, i.e., sometimes rented
with qualified personnel and sometimes directly to the production companies
without qualified personnel. Under
multiple use such as this, the sales tax liability at the time of the purchase
of such equipment becomes uncertain.
I
request a ruling or advise on the circumstances and also request a confirmation
of the correct interpretation of our understanding of the example given in the
regulations of equipment being rented with or without qualified personnel
(R865-19-32S).
A
quick response to this request would be appreciated. If a response is not possible within 30 days of this letter,
please advise.
Sincerely,
XXXXX
Certified
Public Accountants