Response April 8, 1994
Request
November 15, 1993
XXXXX
Utah Tax Commission
160 Est 300 South
Salt Lake City, Utah
84134
Dear XXXXX:
In response to your letter
to the XXXXX dated XXXXX, I would like to obtain an “Advisory Opinion”
regarding the initiation of Schedule A agreements. Three separate scenarios
have been raised by our customer base in XXXXX.
1. We currently have a large lease account
that required some modifications to their equipment which increased the
investment on each vehicle by approximately XXXXX. As a result of the
additional investment, new Schedule A's were executed by both parties. Would
this situation qualify for the sales tax exemption.
2. If a company operates a large fleet of
vehicles, does each vehicles have to operate out of the XXXXX to obtain the
exemption, or could the fleet just demonstrate that they operate a percentage
of their miles out of state?
3. We have a customer who recently
requested that we include his annual licensing fees and personal property tax
in our monthly fixed charges so he doesn't have to pay a large sum of money all
at once. To accomplish this, new Schedule A's were executed three months ago.
Since 50 percent of his miles are out of the state, would he qualify for the
sales tax exemption?
XXXXX, I appreciate
your assistance in helping us clarify this sales tax issue with our customer
base, if you have any questions please feel free to contact me at XXXXX.
Best Regards,
XXXXX
Re: Advisory Opinion -
Sales Tax Exemption for Various Interstate Carrier Leasing Situations
Dear XXXXX:
Your request (copy
attached) for an advisory opinion as to whether certain leasing situations result
in sales tax exemption was referred to the Auditing Division for their
analysis.
The division's staff
recommendations are as follows:
1. A lease which begins as a taxable lease
in Utah continues to be a taxable lease until terminated When a master lease is
modified by changes to the master lease's Schedule A, such a change is
considered as constituting a termination of the old lease and initiation of a
newly negotiated or executed lease. Consequently, if the vehicles involved in
the lease meet the qualifications of the exemption as otherwise outlined in
Administrative Rule R865-19-97S, the newly executed lease will qualify for
exemption. The TC-719 exemption affidavit is required along with the newly
executed Schedule A to evidence the exemption. Assuming the other
qualifications and criteria for the exemption are met, the new Schedule A
executed by both parties will allow the exemption as for a new lease.
2. The exemption is “vehicle specific” in
that only vehicles which operate regularly in interstate commerce qualify.
Fleet mileage ratios do not have the effect of allowing exemption for vehicles
operated only intrastate.
3. Again, if the vehicles involved
otherwise qualify for exemption (vehicle-by-vehicle), newly executed Schedule
A's are considered as constituting new leases and make the exemption available
from date of execution. As indicated above, fleet mileage percentages are not
the criteria for establishing exemption qualification. Each vehicle must be
used in interstate commerce to qualify for exemption.
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 XXXXX State Supreme Court. A Notice of Appeal Rights
and a copy of the XXXXX Taxpayer Bill of Rights are attached.
For The Commission,
Alice Shearer
Commissioner