96-004
Responses
January 6, 1996 and January 23, 1996
Request
RE: Request for Sales Tax Ruling on XXXXX
activities
Ladies
and Gentlemen:
We
are the Certified Public Accountants for XXXXX. They have asked us to write you for a ruling as to whether the activity
which they are engaged in is subject to Utah Sales Tax.
FACTS
XXXXX
has two main components to their business.
The first component is that they are a common carrier for persons
traveling in air commerce. They have a
heliport located at XXXXX and they transport individuals from that heliport to
various spots in the XXXXX Mountains.
The
second major component of their business is that they offer a guide service
from the designated spot in the XXXXX to the bottom of the mountain.
XXXXX
also has another type of business which they render, which is custom tour
charters. This is where three, eight or
twelve people will rent the helicopter for a day and the helicopter flies these
people to any area where the individuals desire to go. On this custom tour charter XXXXX also
supplies professional guides who guide the customer in their skiing activity.
All
three activities mentioned above, XXXXX also supplies a lunch for their
customers.
LAW
It
appears to us that there are two main areas of the Sales Tax law which should
be addressed. The first is travel in air commerce subject to Sales Tax. I believe that it is fairly clearly stated
in Administrative Rules of the Utah State Tax Commission in Rule R865-19-36S
that traveling in air commerce is not taxable.
The ruling states at part B, “All fares paid for intra-state
transportation of persons to common carriers having established routes are
subject to tax except · (3) amounts paid for persons traveling in air
commerce.”
The
second question that must be addressed is, 'should professional guide service
be taxed.' Section 59-12-103, Sales and Use Tax Base, does not indicate in any
of the language that any professional services should be taxed. The only time services are taxed is when
they are in connection with repair or renovations of tangible personal property
or very closely related with services to tangible personal property.
CONCLUSIONS
It
appears to us that the activity in which XXXXX is involved is made up of three
parts. The first part is the traveling
in air commerce and it is our opinion that the administrative rule R865-19-36S
is very clear that this activity is not subject to Sales Tax. This activity is very clearly a charter
airline service. Customers purchase
tickets which allows them to ride on a helicopter from XXXXX, Utah to some
designated points in the XXXXX.
The
second portion of XXXXX business is a guide service. This service consists of a professional person guiding skiers down
a mountain. These guides are performing
a professional service which can save lives of the skiers, are extensively
trained, and are professionals in every sense of the word.
The
third portion of XXXXX business is the providing of lunch for their customers. At the present time, Sales Tax is being paid
to the suppliers of these lunches and therefore, XXXXX should not be liable for
Sales Tax in connection with these meals. These meals are similar to meals
supplied customers of airlines going throughout the world.
As
a result of the above discussion, we respectively request that the Utah State
Tax Commission supply XXXXX as representative for XXXXX, a written statement
indicating the Utah State Tax Commission's position on whether XXXXX is
responsible to collect and remit Utah State Sales Tax. Time is of the essence in this request as
the company will be starting into their business season shortly after the first
of the year, and they need to know if Sales Tax should be collected.
It
is our understanding that Sales Tax would not have to be collected on any of
the above activities.
We
are thanking you in advance for your prompt response to this request.
Sincerely,
XXXXX
XXXXX
RE:
Advisory Opinion - Application of sales tax to XXXXX tour activities
Dear
XXXXX,
We
have received your request for information regarding the taxability of services
provided by XXXXX. We find as follows:
1. Helicopter transportation. XXXXX provides intrastate transportation
from the XXXXX heliport to locations in the XXXXX Mountains. Section 59-12-103(1)(b) imposes sales tax on
amounts paid to common carriers for transportation unless otherwise exempted by
federal law. Since federal law does not
exempt taxation of intrastate common carrier service, charges for this service
are taxable. (Utah Administrative Rule
R865-19S-36 was repealed on August 15, 1995.)
2. Guided tours. Section 59-12-103(1)(f) imposes sales tax on charges for
recreational tours, such as ski tours.
Charges to XXXXX customers for guide service, entrance onto private
lands, use of facilities or use of equipment are taxable.
3. Meals.
If XXXXX provides meals to its tour participants, it may purchase the
food tax free for resale.
Alternatively, if XXXXX pays tax on its purchase of food used in the
meals, it need not collect tax from its customers on charges for the
meals. However, in that case XXXXX must
separately itemize charges for the meals on the invoice or receipt. Charges for exempt items or activities must
be billed separately from taxable charges.
Vendors
who are required to collect Utah sales tax must have a Utah tax number. An application for a tax number is enclosed
(TC9). XXXXX may claim a tax exemption
for its food purchases by presenting the food retailer with a signed exemption
certificate (TC21). Both forms are
enclosed.
Please
let us know if we can be of further assistance
For
the Commission,
Alice
Shearer
Commissioner
Alice
Shearer
Commissioner
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, UT 84134
RE:
Advisory Opinion - Application of Sales Tax to XXXXX activities
Dear
Commissioner Alice Shearer:
After
receiving your advisory opinion, in connection with XXXXX. sales tax problem, I
talked with Commissioner Joe Pacheco.
He recommended that I request a reconsideration of the sales tax problem
of XXXXX. Commissioner Pacheco
indicated that the State Tax Commission was in the process of reevaluating
their position on charter airplane flights in interstate commerce and
intrastate commerce.
It
was my understanding that the State Tax Commission decided to change their
opinion on such matters as a result of the XXXXX case which was decided on
XXXXX. It is my understanding from
Commissioner Pacheco that the United States Congress in recent weeks had passed
legislation which would effect the decision which was reached in this
case. As a result of the above, we
respectfully request that the Utah State Tax Commission take another look at
the taxable status of XXXXX.
Also
in your letter of January 6, 1996, you indicated that the second part of the
XXXXX activities, which is guiding skiers down back country terrain, is a
guided tour. This is not the case. The guides are highly trained professional
people whose main responsibility is to advise skiers where to ski so they are
not in avalanche danger. They also give
them professional instruction on how to ski in powder snow. These individuals are also highly trained in
first aid and avalanche rescue. As
stated earlier, these are highly trained professionals. We would appreciate it very much if you
would reconsider your position on charges for these professional services.
I
would appreciate the opportunity to meet with you and discuss the above
questions at your convince.
As
a result of your prior letters, XXXXX is collecting and will pay sales tax on
their operation until a satisfactory solution is obtained. It is critical to their business that this
problem be resolved as soon as possible. Their customers are very unhappy with
having to pay sales tax on this purchase.
This additional cost could substantially effect their sales. The customers indicate to the officers of
the corporation that other surrounding states do not charge sales tax on such
an activity.
If
you have further questions or if we can give you further information to help
you make a decision, please do not hesitate to contact us.
Enclosed
please find a copy of your January 6, 1996 letter and a copy of our December
28, 1995 request for sales tax ruling letter.
Sincerely,
XXXXX
XXXXX
Re:
Advisory Opinion Taxability of charges by XXXXX.
Dear
XXXXX,
In
response to your request for reconsideration of our January 6th advisory
opinion, we find as follows:
Section
59-12-103 (1)(b)(I) of the Utah Code imposes sales tax on the amount paid for
transportation unless otherwise prohibited by federal law. The Jefferson Lines case imposes certain
limitations on taxation of interstate activities, and Congress recently imposed
limitations on the state's authority to tax interstate motor carrier passenger
service. Neither the case nor the
congressional act prohibit taxation of intrastate air passenger service. Therefore, XXXXX charges for passenger
service are taxable under the section cited.
We
understand your client's concerns that surrounding states may have more
favorable taxing schemes. However, we
have no authority to grant an exception to current state law. Your client may wish to pursue the matter
with the state legislature.
Under
section 59-12-103 (1)(f)(I), charges for recreational activities are subject to
sales tax. The Commission has
interpreted this language to include charges for guide services which are part
of the recreational activity.
If
you still object to our determination, your client may petition the Commission
for a declaratory judgment under Utah Administrative Rule R861-1A-4 (copy
enclosed) within 30 days of the date of this letter.
Please
let us know if you have further questions.
For
the Commission,
Alice
Shearer
Commissioner