95-054
Response
September 5, 1995
Request
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, UT 84134
Dear
Commission:
As
a newly formed long distance telephone service provider in the State of Utah,
XXXXX would like to know what taxes relative to the sale of prepaid calling
cards and business long distance need to be remitted to the State to be in
compliance with applicable Code.
It
is our understanding that the actual sale of prepaid calling cards is not
subject to sales tax until the card is actually used since the card itself has
no value. It merely represents the
opportunity to obtain long distance telephone service at some point in the
future and as such is only taxable once the customer actually uses the card
(receives services). This would be
analogous to the purchase of a gift certificate from a retail merchant since
the certificate itself represents the opportunity to obtain goods or services
in the future. Its sale is an exchange
of forms of payment rather than an exchange of goods/services for
consideration.
The
business long distance services, on the other hand, are an example of goods or
services exchanged for consideration and are therefore candidates for sales
taxation at the rate of XXXXX within the XXXXX area.
It
would also be helpful is you could provide references to the Utah Code in your
response so that we might better understand our obligations. Thank you for your assistance.
Sincerely,
XXXXX
XXXXX
RE: Advisory Opinion Request - Application of
sales tax to prepaid calling cards
Dear
XXXXX,
We
have received your request for an advisory opinion regarding the application of
sales tax to prepaid calling cards sold by your company. The Commission has received a number of
requests for information regarding the imposition of sales tax on a variety of
telecommunication services. These
inquiries have raised new issues which are not addressed in our current
statutes and administrative rules.
Because technology in this field is changing at a quick pace, the state
has hired a consultant to study these issues and to advise the legislature regarding
statutory amendments. Although the
results of that study may not be available for some time, they will certainly
result in some changes that will impact your company. In the meantime, we offer
the following general guidance on your question:
The
sale of prepaid calling cards are not taxable, but the charges for intrastate
long distance calls charged against the card are taxable. We will keep you informed of developments in
this area. In the meantime, please let
us know if we can be of further assistance.
For
the Commission,
Alice
Shearer
Commissioner