94-032
Response
February 28, 1995
Utah State Tax
Commission
Office of the Commissioners
210 North 1950 West
4th Floor
Salt Lake City, Utah
84134
RE: Request for
Advisory Opinion
Dear Commissioners:
Please accept this
letter as a request for an advisory opinion relating to sales tax under the
following circumstances:
A corporation purchases
advertising display boards (approximate size 4' X 6') and leases them to
colleges, and other institutions of higher education. The advertising boards are attached to the wall in a building
designated by the lessee. The
advertising boards are never sold to the user.
If the user doesn't renew the lease, the lessor corporation removes the
board from the lessees premises and takes possession of it.
In my opinion, the
major question is if the display boards would be considered as a lease of real
property or of tangible personal property.
My understanding would be that if the boards are considered real
property, the corporation should pay sales tax when they initially purchase the
boards and charge no tax as part of the lease payments. If the boards are considered tangible
personal property, the corporation would pay no sales tax at the time of
purchase, but would collect sales tax as a part of each lease payment.
My client is
comfortable in handling the sales tax in either manner, I wanted to get the Tax
Commission’s opinion to insure that I instruct them correctly. If additional information is required please
contact me at the number shown below.
Sincerely,
XXXXX
XXXXX
Re: Advisory Opinion -- Sales Tax on Leases of
Advertising Display Boards
Dear XXXXX:
You requested an
advisory opinion as to how sales tax applies to transactions involving 4' X 6'
advertising display boards which are leased to colleges and other institutions
of higher education.
Our research indicates
as follows:
1.
Such advertising display boards, whether or not attached to the realty,
are considered as tangible personal property when leased as described in your
letter.
2.
Consequently, your client should purchase the boards tax free for resale
and collect tax on each periodic lease payment as indicated in Administrative
Rule R865-19S-32.
This opinion is based
upon the facts presented in your letter.
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.
For The Commission
Alice Shearer
Commissioner