96-012

Response January 18, 1996

Request

January 4, 1996

Dear Sir/Madam:

XXXXX requests a clarification of the law concerning the taxability of separately stated charges for digital audio programming services. In particular, XXXXX seeks a clarification regarding the taxability of a digital music service distributed by satellite to subscribers. This service is offered by direct broadcast satellite (“DBS”), which allows for distribution to areas that are not currently wired for cable.

Brief statement of XXXXX's Interpretation

XXXXX asserts that digital music satellite services in Utah are not taxable because they are not specifically enumerated as services subject to sales tax.

Discussion of Utah Law

Utah provides a list of enumerated services pursuant to U.C., Section 59-12-103. This list designates certain services as subject to sales tax because they are specifically enumerated. Our interpretation is that any services not specifically enumerated as taxable are exempt from sales tax in Utah.

Conclusion

Based on the foregoing, XXXXX believes that the service of providing music by satellite is exempt from sales tax because not specifically enumerated as a taxable service.

Questions/Requests

Does the Utah state Tax Commission agree with XXXXX's interpretation that the service of providing music via satellite is exempt from sales tax?

In addition to a written clarification of the law on this issue, XXXXX requests that the Utah state Tax Commission provide XXXXX with a telephone contact in order to discuss any issues not fully resolved by the written clarification.

XXXXX requests a written response by letter to the question and request presented above concerning the taxability of separately stated charges for digital audio programming services. We would appreciate a detailed written response at your earliest convenience. Please direct the written response to me at the following address:

XXXXX

I may be reached at XXXXX. Thank you in advance for your assistance in this matter.

Very truly yours,

XXXXX

January 18, 1996

XXXXX

RE: Advisory Opinion - Application of Sales Tax to Direct Home Satellite Services

Dear XXXXX,

We have received your request for an advisory opinion regarding the application of sales tax to the satellite services sold in Utah by XXXXX. You may be interested to know that the Utah State Legislature has hired a consultant to conduct an extensive study of tax issues relating to the telecommunications fields. The outcome of the study may result in changes to the tax code that will impact your company's sales in the future. In the meantime, we find as follows:

Section 59-12-103 (1) (b) (ii) imposes sales tax on intrastate telephone service. Telephone service is defined to include various types of transmissions by wire, light waves or other electromagnetic means. Utah Admin. Rule R865-19S-103. Although the language of the rule seems to encompass satellite transmissions, we have interpreted the rule narrowly to include only telephone service. On that basis, we have advised satellite companies that direct satellite transmissions to their customers are not taxable transactions. If your company rents or leases satellite equipment to your customers as part of this service, sales tax must be collected on those charges.

Please let us know if we can be of further assistance.

For the Commission,

Alice Shearer

Commissioner