96-033
Response February 9, 1996
Request
Dear
Commissioner:
We
respectfully request your opinion concerning the proper sales and use tax
treatment of a particular service/product provided by our client to their
automobile dealership customers. We ask
for your response by XXXXX. If you will
be unable to provide a complete response by this date, we respectfully request
you acknowledge receipt of this inquiry and indicate when a response can be
anticipated.
FACTS
Our
client produces a service pricing guide customized to the needs of each
of their automobile dealership customers.
The dealership can request that the service pricing guide be customized
as much or as little as desired (i.e. different times, per hour costs, and
supply costs for different repairs).
The dealership provides their repair or routine service labor rates for
specific automobiles by manufacturer (i.e. XXXXX etc.). Our client establishes a database
incorporating the labor costs with standardized parts costs, miscellaneous
costs and sales taxes. Using this database, our client creates a service
pricing guide. The dealership uses the
pricing guide for quickly and professionally estimating service costs in a
comprehensive format for virtually all standard repairs.
Presently,
the service pricing guides are provided on three types of media: 1) paper
manual, 2) software (tape) for mainframes, and 3) software (diskette) for a
stand alone personal computer. The guides are updated monthly or quarterly, as
requested by the dealership. A one time
set up fee is charged for consultation about the selection of the best media
form for the dealership, establishment of the databases, and installation of
the service pricing guide on the dealership's computer, if necessary. Also, the dealership is charged a monthly
maintenance fee for the right to have the database updated as needed.
The
consultation generally is provided at the dealership's location in your state. The establishment and maintenance of the
database is performed at our client's location not in your state. The installation of the database on the
dealership's computer may occur manually at the dealership's location in your
state or at our client's location via telephone or satellite connection
depending upon the form of media or the computer sophistication of the
dealership's personnel.
QUESTIONS
The
following questions are designed for “yes” and “no” answers and address the
taxability of the service/product 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 charge for the set-up fee (consultation, building of database, and
installation) taxable?
2)
Does your answer to question #l change if the installation is done via
telephone or satellite connection?
3)
Is the monthly maintenance charge for the right to updates taxable?
4)
Do your answers to the above two questions change if the service pricing guide
is in software format as opposed to a paper manual?
So
that we may follow up with any additional questions that may arise, please
provide the following information:
Name
of Respondent
Title
Telephone
Address
Thank
you very much for your consideration and attention to this matter.
Truly
yours,
XXXXX
XXXXX
Tax
Senior
RE:
Advisory Opinion - Application of sales tax to sales of pricing guides.
Dear
XXXXX,
We
have received your request for an advisory opinion regarding the sales tax
treatment of your client's sales of service pricing guides to automobile
dealerships. We find that the sale of pricing
guides to dealerships in Utah is subject to sales tax, regardless of whether
the guide is delivered in the form of a book or in the form of software on
disks or tape.
In
Utah, charges for designing custom software are not taxable. However, the sale of computer generated
output is subject to sales and use tax if the primary object of the sale is the
output and not the programming services.
From your description, your client appears to be selling the pricing
guide, not programming services. Therefore,
sale of the pricing guide is taxable. Monthly charges for sales of updated
guides are also taxable.
The
initial consultation, database development and installation are each component
parts of the final taxable item, even if performed via telephone or
satellite. Therefore, all charges
associated with the service pricing guide are subject to sales tax.
Please
let us know if you have additional questions.
For
the Commission,
Alice
Shearer
Commissioner