95-086
Responses
February 19, 1995 and December 4, 1995
Request
February
19, 1995
XXXXX
Dear
XXXXX,
This
letter is in confirmation of our recent telephone conversation, and in response
to a January 28 letter from XXXXX (copy attached).
Sales
of food and beverage items through on-premise vending machines owned and
operated by the schools are exempt from the sales tax under the Utah Code
Annotated Section 59-12-104 (copy attached) which exempts "sales of meals
served by.. public elementary and secondary schools." The vending machines are considered as
operated by the schools if the school purchases the items vended, places the
items in the machines, and collects and accounts for the receipts from machines
sales.
Generally,
other types of sales of tangible personal property and sales of admissions to
any place of amusement, entertainment, recreation, sporting events, etc. are
taxable when sold by the school, its student body, clubs, etc.
I
have enclosed copies of the relevant statutes, Tax Commission Administrative
Rule R865-19-54S, and Tax Bulletin 15-88 for your review.
If
you have further questions, please feel free to contact me.
Respectfully,
XXXXX
Utah
State Tax Commission
XXXXX
Sales
and Use Tax
160
East Third South
Salt
Lake City, UT 84134
Dear
XXXXX
Early
in 1993 we discussed the requirement of collecting Utah Sales Tax on our
vending machine sales. The first
attachment is a copy of the letter giving your opinion as to our liability to
collect that tax.
We
have recently been given a draft copy of “Sales Tax Guidelines for Schools and
Public Institutions of Higher Education.”
I am not sure what agency has distributed this document, but if you will
note, the pink high lighted section on page 4, it rescinds the letter that you
issued in my behalf in February of 1993.
We
have avoided an increase in our vending prices so that we can keep our students
on campus during the school day. At 50¢
for pop and candy bars, 25¢ for chips you will agree that we are keeping prices
down for the benefit of the students and still we make some money for the
school. Without this, our truancy and tardiness would increase as students will
leave campus to get their sugar fix.
In
an attempt to keep our prices low, and keep the students in school we are
asking if our vending operation would fall under the fund raising activities
found on page 5 of the above document (high lighted in green).
As
a teacher at XXXXX, the vending operations have been under my direction for the
last 12 years. There are no wages paid
to the individuals who stock the machines.
On occasion they do take a candy bar or pop when working.
As
for the use of the profits from the vending operation, they are used to buy
equipment, supplies and other school needs.
Attached is a print out of the vending account from the first of the
school year to give you an idea of how these monies are used.
You
will find that we have spent $$$$$ for school equipment, including file
cabinets, a visual presenter, and microphones for our auditorium. Another $$$$$ for classroom and professional
publications, $$$$$ for office supplies and a game for my law class, $$$$$ for
CD-ROM clip art for use in our computer labs and $$$$$ for XXXXX gift certificates
use as incentive prizes to encourage students to seriously participate in the
XXXXX. Some of these certificates will
be used as a thank you for community presenters and student volunteer work.
Purchases
that I am working toward this year include $$$$$ for 10 transcription machines
for my word processing class, $$$$$ to upgrade our word processing software,
$$$$$ for a white board for the computer programming classroom, $$$$$ for new
locks on storage cabinets that house vending back stock, etc.
This
is a good representation of what we have done with the vending profits over the
past 12 years.
Again,
I ask if you would send me a letter stating your opinion as to whether we could
be classified as a fund raiser under the new guidelines.
Sincerely
XXXXX
XXXXX
RE:
Advisory Opinion - vending machine sales.
Dear
XXXXX
You
recently addressed some questions about vending machine sales to our Auditing
Division. Your request was forwarded to me for a formal response.
In
your letter, you refer to a draft of a publication outlining a school's duty to
collect sales tax on various sales and fees.
That publication, when finalized, will be published by the Tax
Commission for the benefit of school administrators who may find themselves
participating in sales tax audits in the future.
The
publication is a result of a recent report by the Office of the Legislative
Auditor. That report criticized the Tax
Commission for failing to include schools and other public entities in the
sales tax audit process. We intend to
include schools in the audit process beginning with the new fiscal year in July
1996. In the meantime, the publication
is intended to help schools make whatever adjustments are necessary to bring
their accounting practices into compliance.
XXXXX
of the Office of Education and XXXXX of the School Superintendents Association
are working with other school administrators to prepare a legislative bill to
create new sales tax exemptions for schools.
Of course we cannot predict the outcome of that legislation, but the legislature
may make some changes that will, in turn, supersede some of the information
that appears in the our sales tax booklet.
For the moment, we can only instruct you as to the current law.
With
regard to the sales tax exemption on meals served by a school, we interpret the
exemption to apply to food items offered by the school through its school lunch
program. We consider a sale to qualify
if the revenues are deposited in the school or school district's lunch or food
service fund. (The final draft of the
publication will reflect this change.)
The vending machine sales that you describe do not appear to qualify as
tax exempt meals.
You
asked if the vending machine sales qualify for the fund raiser exemption. To qualify as a fund raiser:
1. the sales must be under the direction
of a school, school association or teacher;
2. the sales must be made by the
students; and
3. the revenues must be used purchase
equipment and materials for the school.
Although
you use some of the revenues to purchase equipment for the schools, most of the
revenues are apparently used to restock the machines. The primary purpose of the machines is to provide low cost food
sales to the students, not to buy equipment for the school. Secondly, the vending machine sales are not
sales by the students. The vending
machine sales do not appear to qualify for the fund raiser exemption.
We
believe that the fund raiser exemption will also be addressed in the
legislative bill that is being drafted on behalf of the schools. If you would like more information on the
bill or if your school would like to provide input, contact XXXXX, Executive
Director of the Utah School Superintendents Association, XXXXX.
For
the Commission,
Alice
Shearer
Commissioner