Response January 30, 1995
Request
January 4, 1995
W. Val Oveson, Chairman
Utah State Tax Commission
160 East 300 South
Salt Lake City, Utah 84134
Dear Commission Oveson:
XXXXX wondered if you would please respond to these two letters and
send him copies of your responses.
If you have any questions, XXXXX's home number is XXXXX.
Thank you.
Sincerely,
XXXXX
XXXXX
Re:Tax Exempt Status of XXXXX and Related Activities Our File XXXXX
Dear XXXXX
It has come to my attention several times over the past couple of years
that the gift shop in the XXXXX continues to operate under the guise of the
tax-exempt status of the hospital and does not charge or collect sales tax from
its sales activities. In not charging
the required sales tax, the hospital gift shop is acting in part in reliance of
a 1970 Attorney General's provision issued in regard to the XXXXX. The comments regarding the hospital gift
shop have clearly been directed to me and my wife, XXXXX, due to my wife's
ownership of XXXXX, a gift shop located at XXXXX, Utah. Originally, I had no concern about a gift
shop operated for the convenience of patients.
However, it has become clear that the gift shop's activities have
expanded far beyond mere convenience to patients.
Over the past couple of years, the gift shop has engaged in
considerable outside solicitation in holding open houses and sending out
special invitations to shoppers to visit the hospital gift shop. Such expanded activities are not merely
incidental to the hospital's charitable purpose. Rather, these activities tend to compete more directly with other
businesses in the area. Indeed, it
would seem that a considerable number of people shop at the hospital gift shop
specifically to take advantage of the savings resulting from the failure to
charge sales tax. It would clearly seem
that the hospital's exempt status as to gift shop sales should be revoked and
that the sales tax on all such sales should be imposed and collected.
Lest our complaint in regard to the hospital gift shop be construed as
"sour grapes" competition, please note that we welcome competition
from large and small competitors alike.
However, a state sponsored subsidy to a hospital gift shop in the form
of a sales tax exemption is inappropriate and something less than smart
government. Indeed, I see no reason why
XXXXX should not be collecting sales tax on all sales from its gift shop. Its charitable function relates to the
providing of health care services, not the conduct of a retail business in
competition with other tax paying businesses. This seems to be just one more
example of legitimate business carrying a disproportionate share of the tax
burden of the state. Again, we are
happy to compete with any legitimate business.
All that we ask is that we be provided a level playing field.
Your attention to this matter is appreciated. Please direct your response to the undersigned at the above
address or telephone number.
Very truly yours,
XXXXX
TO: XXXXX, Director
FROM: XXXXX, Secretary
DATE: January 12, 1995
SUBJECT:Request for Advisory Opinion - No. 95-004DJ
Attached is a request for an advisory opinion from XXXXX, II. Will you please review the request of XXXXX
for an advisory opinion regarding the tax exempt status of XXXXX and related
activities. XXXXX would appreciate it
if you would RUSH this request.
Please prepare the response for signature by the Commission as per the
guidelines established by them.
Thank you.
XXXXX
XXXXX
Dear
XXXXX
Your
letter of XXXXX to XXXXX (copy attached) was forwarded by the XXXXX to
Commissioner W. Val Oveson, Chairman, Utah State Tax Commission for review,
response, and appropriate action. Our research
has focused on the general application of sales and use tax exemptions to
hospital gift shops.
It
indicates as follows:
1. Utah Code Annotated Section 59-12-104(8)
exempts "sales made to or by religious or charitable institutions in the
conduct of their regular religious or charitable functions and activities, if
the requirements of Section 59-12-104.1 are fulfilled."
2. U.C.A. Section 59-12-104.1 deals primarily
with exemption treatment related to purchases by religious or charitable
institutions rather than sales by them, and is consequently not relevant to the
issues at hand.
3. Administrative Rule R865-19S-43 (copy
attached) expands on administration of the exemption and requires that
religious and charitable organizations, in order to avail themselves of the
exemption, must apply for an exemption number and determination from the Tax
Commission. The rule further indicates
that such institutions are not relieved of responsibility to collect and remit
sales tax on sales resulting from "unrelated trades or business" as
defined in 26 U.S.C.A. Section 513 (West Supp. 1993).
4. The fact that an institution or organization
is in competition with private enterprise is not sufficient, in and of itself,
to disqualify the exemption.
5. If, on the other hand, such an organization
goes well beyond its stated and approved purposes, the Commission would be
compelled to take appropriate action.
Because
each case may be difference, we are unable to determine from a distance whether
this organization goes well beyond its stated purposes. Therefore, I have asked the Auditing
Division to look into it. They will
work it into their schedules as soon as possible.
I
hope this explanation is helpful to you.
For
The Commission,
Alice
Shearer
Commissioner
XXXXX
XXXXX
Dear
XXXXX
Enclosed
is a copy of the Tax Commission response to the letter you received from XXXXX.
If
I can be of further service, please advise me.
Sincerely,
W.
Val Oveson
Chairman
TO: XXXXX
FROM: Alice Shearer
DATE: January 31, 1995
RE: XXXXX
After we asked for an advisory opinion, the answer was still not clear
cut. Will you please ask XXXXX to have
someone make a site visit?
The USCA definition of "unrelated trades or business" and our
rule are apt to be seen as totally subjective by any interested inquirer. In practice there are surely solid criteria
but it does not come through in our letter.
Thank you for your help.