95-075
Response
October 20, 1995
Request
State
Tax Commission
160
East 300 South
Salt
Lake City, UT 84134
Dear
Commissioner:
We
respectfully request your opinion concerning the proper sales and use tax treatment
of services provided by one of our clients to their automobile dealership
customers. We ask for your response by September 15, 1995. If you will be
unable to provide a complete response by this date, we respectfully request you
to acknowledge receipt of this inquiry and indicate when a response can be
anticipated.
FACTS
We
have enclosed an example of an agreement for the below services between our
client and a prospective automobile dealership to assist your understanding of
the nature of our client's business. Our client has already established nexus
in your jurisdiction; but, the services performed under the agreement to an
automobile dealership located in your jurisdiction are performed outside your
jurisdiction.
Our
client will obtain the following from automobile dealership customers, some of
whom are located in your jurisdiction: sales brochures, dealership logos,
dealership profiles, model information, automobile listings, parts and service
offerings, maps to dealerships and special program offerings. Our client will
scan this information into a proprietary software system and develop a
copyrighted multi-media advertising program tailored to each individual
automobile dealership customer. This advertising multi-media program will then
be placed on the Internet using the World Wide Web (WWW) system and broadcast
24 hours a day, seven days a week so that any potential customer may access
this information, see what automobiles and services each dealer offers, and
develop a comfortable relationship with a dealer before they visit the
showroom. Our client assesses a subscription charge to the dealer to scan the
original information into the computer and for developing the advertising
program. There are also monthly maintenance charges assessed to the dealer by
our client to leave the advertising on the Internet and update the information
as needed.
QUESTIONS
The
following questions are designed for "yes" and "no" answers
and address the taxability of the services our client offers to the automobile
dealerships in your jurisdiction. We also ask for any narrative response that
you believe is important to help clarify your state's position. Please include
relevant citations to law or regulations as support for your answers.
For
your convenience, responses may be directly made on this page and returned in
the enclosed envelope. If a response cannot be made because of insufficient
information, please do not hesitate to contact XXXXX at XXXXX.
1)
Is the subscription charge for scanning the original brochures, maps, etc. into
the proprietary software subject to sales tax in your jurisdiction?
2)
Is the subscription charge for the creative developing of the multi-media
advertising program subject to sales tax in your jurisdiction?
3)
Is the monthly maintenance charge for continuously providing the advertising
program on the Internet subject to sales tax in your jurisdiction?
4)
Is the monthly charge for updating the advertising program on the Internet
subject to sales tax in your jurisdiction?
So
that we may follow-up with any additional questions that may arise, please
provide the following information:
Name
of Respondent
Telephone
Address
City
State
Zip
Thank
you very much for your consideration and attention to this matter.
Truly
yours,
XXXXX
Tax
Senior
XXXXX
RE: Advisory Opinion - Application of sales tax
to sales of advertising space on the Internet.
Dear
XXXXX,
We
have received your request for an advisory opinion regarding the application of
sales or use tax on your sales of advertising space on the Internet. The use of
on-line computer services is a rapidly developing field which constantly
challenges us to determine what types of services are taxable. We hope that the
Utah State Legislature will specifically address issues like this in their
future statutory guidelines. In the meantime, we find as follows:
1. The sale of advertising space in an on-line
Internet service is not a taxable transaction for purposes of the Utah sales
and use tax. The initial charge and the on-going monthly fees are not taxable.
2. Services to design multi-media advertising
programs are not subject to Utah sales tax.
If
you have additional questions, please address them to our Tax Policy Analyst,
XXXXX at XXXXX or our Technical Research Section at XXXXX.
For
the Commission,
Alice
Shearer
Commissioner