Response
February 5, 1993
Letter
February
5, 1993
XXXXX,
CPA
Re:
Advisory Opinion - Sales Tax on Purchases Using XXXXX
Dear
XXXXX:
Your
request for an advisory opinion as to whether XXXXX may take advantage of its
sales tax exemption when making credit card purchases was referred to the
Auditing Division for their analysis.
It
is the division staff recommendation that:
1. The Utah statutes and Tax Commission
Administrative Rules R865-19-42S and R865-19-54S (copies attached) recognize a
sales tax exemption for purchases made by your city.
2. As noted in Rule R865-19-54(C)(8), sales to
officers or employees of exempt instrumentalities are taxable.
3. Rule R865-19-42S indicates that if the sale
"is paid for by a warrant drawn upon the state treasurer or the official
disbursing agent of any political subdivision, the sale is considered as being made
to the state of Utah or its political subdivisions and exempt from tax."
4. Administrative Rule R865-19-23S (copy
attached) describes the documentation a seller must retain in order to verify
the nontaxable status of exempt sales. For sales to qualified government
agencies, the rule indicates "the vendor must keep a purchases order or
other acceptable evidence of exemption such as a copy of a check or
voucher." Since the seller does not see the actual payment in the case of
a credit card purchase, the use of the credit card creates a verification
problem for the seller.
5. Nevertheless, purchases made with the credit
card used as the description in your letter outlines, are properly exempt from
the tax. Since, up to this point, only one credit card has been approved by
this agency (see Tax Bulletin 6-89 attached) for use in charging hotel/motel
accommodations, you should expect some difficulty with motels accepting the
credit card for exempt purchases. You may provide them with a copy of this
Advisory Opinion to alleviate the hesitancy you may encounter.
Based
on 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 a be appealable to the Utah State Court. A Notice of
Appeal Rights and a copy of the Utah Taxpayer Bill of Rights are attached.
In
contacting the Tax Commission, if special accommodations are needed in
accordance with the Americans with Disabilities Act, please call (801)
530-6920, (801) 530-6077 or TDD (801) 530-6269 allowing three working days
notice.
For
the Commission,
Joe
B. Pacheco
Commissioner
Hal
Hansen
Commission
Chairman
Utah
State Tax Commission
Heber
M. Wells Building
160
East Third South
Salt
Lake City, Utah 84134
[RE:
Seeking as Advisory Opinion Letter - Tax exempt credit card purchases]
Dear
Chairman Hansen,
Following
the advice of the Sales Tax Division, we are writing this letter. We are
seeking an "Advisory Opinion Letter." The XXXXX charges hotel rooms
to a "city" credit card. (XXXXX) The city receives the Credit Card
bill directly. The city pays the credit card bill directly. It has been our
experience in the past that sales tax was charged to us for such purchases. The
Sales Tax Division suggested we obtain an "Advisory Opinion Letter"
to allow a tax exempt status for such purchases.
We
would appreciate a your opinion on this issue.
Thank
you.
XXXXX
CPA
Finance
Director/Recorder
XXXXX