96-103
Response
June 28, 1996, June 28, 1996 and June 28, 1996
Request
XXXXX
Dear
XXXXX
XXXXX
has asked me to write to you about a very sensitive subject. The XXXXX was recently
informed by the State of Utah that we must now charge sales tax on any items we
sell. This includes but is not limited to T-shirts, postcards, plat maps,
zoning and subdivision books. In discussing this with XXXXX at the Utah State
Tax Commission, I explained the XXXXX project to him and our concern that
certain items being sold in conjunction with the “XXXXX” production were not
being taxed, and that this could amount to a sizable amount of revenue for the
XXXXX. XXXXX sent me a copy of the Utah Sales Tax code which clearly states
that food that is sold by a charitable or non-profit organization that is
available to the public, not just employees is definitely subject to the
collecting and remitting of sales tax. I have enclosed a copy of the tax code
for your information. The XXXXX is sure that XXXXX never intended to avoid the
collecting and paying of these taxes, that this is just an oversight, and that
you will want to see that collecting this sale tax is set up for the beginning
of this year's schedule. This would include the dutch oven meals and concession
stand sales. In the original 501-3C charter that XXXXX submitted, the specific
purpose of indoor and outdoor dramas was listed, and that apparently eliminates
ticket sales from coming under the required sales tax requirement, but the
sales at the gift shop may be taxable. This can be determined from XXXXX at the
Utah State Tax Commission. XXXXX
The
XXXXX pledges to continue to work with XXXXX in any way possible, and hope that
you will look into this sales tax issue as soon as possible.
Sincerely,
XXXXX
XXXXX
Dear
XXXXX
I
spoke with XXXXX last week and he was kind enough to send me the Utah Law Code
about sales tax on food sold by nonprofit organizations. XXXXX has built a
large complex in XXXXX which consists of a “School for the Arts” and a large
outdoor amphitheater, which is the home of the production called “XXXXX.” In
conjunction with the theater production, which will run for 100 nights this
summer, dutch oven style meals are served. They are catered by XXXXX in
Washington, Utah. To our knowledge, no sales tax was collected on any meal
served last summer, nor on any food sold through the concession stand. The
XXXXX is pursuing this because in all the planning meetings that XXXXX held
with XXXXX during the construction of the school and the theater, never once
did they tell the Town that they were filing a charter for a 501 3-C. The XXXXX
provides many services to the complex, without any compensation, and so I was elated
when XXXXX sent me copies of the code. I have sent the enclosed letter to XXXXX
at XXXXX and hope they will resolve the “oversight” promptly. From their
charter it appears the ticket sales are not subject to sales tax, but I am not
sure about the gift shop, which sells a variety of items. A conditional use
permit was granted to the school “in perpetuity” by the XXXXX, but they have
never applied for any kind of town business license, and we had heard
unofficially that they believe they do not have to have a license, nor collect
and pay sales tax, because they are a “school.”
Anything
you can do to help the XXXXX in this will be very much appreciated.
Sincerely,
XXXXX
TO: XXXXX,
Tax Policy Specialist
Office of the Commission
FROM: XXXXX, Disclosure Officer
Administration Division
DATE : June
18, 1996
SUBJECT:
XXXXX
I
received a fax yesterday from the XXXXX for the Arts. They are affiliated with
the XXXXX. This foundation currently has a sales tax exempt number as a
charitable organization. I spoke with them last year regarding sales tax
exemptions and their organization. At that time, I was under the impression
that they would hold an event for 3 or 4 days at a time and that those items
that they sold relating to the event would be tax exempt. They had indicated at
that time that the profits of all sales would go directly back into the
organization. Attached is a copy of their letter and my response.
On
XXXXX, the XXXXX sent them a letter indicating that they should be collecting
sales tax on those things that they are selling at the event that they are
holding down there. Attached is a copy of their letter to XXXXX. The XXXXX is
equating this to the information they had received from the Tax Commission
indicating that they must now begin collecting sales tax on those items they
sell as a government agency. What they do not realize is that this is a
separate issue from the charitable exemption. XXXXX from the XXXXX indicated to
me on the phone that the meal is separate from the ticket sales. She stated
that they tickets for this production are $$$$$ each and the meal is $$$$$. She
also stated that the dutch oven meal is catered by an organization out of St.
George by the name of XXXXX. She is not sure who is operating the concessions.
XXXXX
indicated that the price of a meal is included in their tickets sales in which
the prices are set and advertised. There is great concern on how they will
handle this if in fact they will have to begin charging sales tax.
Please
review the attached information and issue a letter ruling to them as soon as
your schedule permits. If you have any questions, please contact me at XXXXX.
Thanks!
XXXXX
XXXXX
Disclosure
Officer
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, UT 84134-3110
RE:
Sales Tax Exemption
Dear
XXXXX
Thank
you for your time and the clarification you provided to me in our recent phone
calls. This letter is to confirm our mutual understanding of the tax code regarding
sales and use tax for sales made by the XXXXX
The
following are the aspects of our organization that will involve sale of goods
and services:
1. Tickets for shows, which may include a
meal on the site.
2. Commission sales.
3. Gift Shop sales.
4. School music store sales.
5.
Vending machine sales.
6.
Shuttle Bus tickets.
We
will not be collecting or remitting sales tax for any of the above sales
because all of the proceeds go back to the XXXXX and are used in the conduct of
the XXXXX regular religious or charitable functions and activities.
Thank
you again for your time and assistance.
Sincerely,
XXXXX
Re:
Sales tax exemption
Dear
XXXXX
I
have reviewed your letter of Jan. 19th and concur with the items listed in your
letter as being exempt from sales tax. Again, all of the purchases must be made
directly by the organization and any the proceeds from any sales must go back
to the organization.
If
you have any questions, please contact me at XXXXX
Sincerely
yours,
XXXXX
Disclosure
Officer
XXXXX
Disclosure
Officer
Administration
Utah
State Tax Commission
Re: Advisory Opinion - tax on sales by
non-profit organization
Dear
XXXXX
We have received your request for an
opinion regarding sales of food and other items from the XXXXX for the
XXXXX. At about the same time, a letter
from XXXXX, XXXXX was forwarded to us from the Auditing Division. XXXXX’s letter concerns the same issue, so
we issue this opinion in response to both requests.
As represented in your request and
its accompanying documents, XXXXX is affiliated with the XXXXX. The XXXXX is a charitable organization
recognized by the Commission as qualifying for sales tax exemptions extended to
religious and charitable institutions.
We assume for purposes of this opinion that XXXXX falls under the
umbrella of the XXXXX’s exempt status.
Under section 59-12-104.1 (1) of the
Utah Code, sales by an charitable organization are exempt from sales tax if the
sale is made in conduct of the organization’s regular functions or
activities. It is not always easy to
distinguish when a charitable organization’s activities fall outside its
regular functions, but the Utah Code and administrative rules provide some
insight.
With regard to food sales, section
59-12-104 (14) of the Utah Code states that sales of meals served by a
charitable organization are exempt if the meals are not available to the
general public. Note that the
organization claiming exemption has two hurdles to overcome. First, the food must be served by the
organization. Apparently, XXXXX has
entered some type of agreement with XXXXX to serve dutch oven meals and other
foods sold through the concession stands.
It is not clear from the information before us whether the food sales
constitute meals served by the exempt organization. XXXXX Catering may be acting as XXXXX’s agent or it may be making
foods sales in its own capacity, then paying a commission, license fee or
contribution to XXXXX for the privilege of selling food in conjunction with
XXXXX’s productions. Whatever that
arrangement, the food sales fail to pass the second hurdle because the food
items are available to the public.
Therefore, the food sales are taxable.
We do not have a clear picture of
other sales made by XXXXX. It appears
that the ticket sales for the production “Utah” are exempt because the sales
are directly related to XXXXX’s educational function. (If an outside producer rents the facility to put on concerts or
plays, such ticket sales are taxable.)
Sales by XXXXX of books or educational supplies to its students are also
exempt. However, the exempt status of
other sales by XXXXX to the general public is questionable. In general, XXXXX must collect sales tax on
any sales income arising from unrelated trades or businesses and report that
sales tax to the Tax Commission unless the sales are otherwise exempted by
law. Utah Administrative Rule
R865-19S-43 ties the term "unrelated trades or businesses" to section
513 of the IRS Code. Therefore, if the
organization is required to include receipts from some of its sales in its
taxable income for federal income tax purposes, the activities that generated
those receipts are ineligible for the sales tax exemption unless some other exemption
applies.
Two issues remain: (1) whether
unpaid sales tax is due from past sales, and (2) whether XXXXX is entitled to
some relief for future taxes given that its published prices do not include
sales tax. With regard to the first
issue, we will ask a representative from our Compliance Auditing Section to
contact XXXXX for the purpose of gathering more specific information about
their sales and operations. If that
interaction results in an assessment, XXXXX may address its request for relief
through the appeals process. With
regard to the second issue, the Commission may be flexible if a taxpayer is out
of compliance because he reasonably relied in good faith on a miscommunication
with our staff. We are not sure if that
is the case here, but XXXXX is welcome to
raise that issue with us directly so we can evaluate its particular
circumstances.
You asked for an internal opinion,
and we presume that you are in continuing contact with the parties involved in
this issue. We will also issue letters
directly to XXXXX and XXXXX so they will have our preliminary findings in
writing. Thank you for bringing this
matter to our attention.
For
the Commission,
Alice
Shearer,
Commissioner
XXXXX
Re: Sales tax on sales by XXXXX
Dear
XXXXX
XXXXX, our disclosure officer,
received a request from the XXXXX for information relating to the exempt status
of sales made by XXXXX or by vendors at XXXXX’s facility. She, in turned, asked the Commission for an advisory
opinion. We have issued that opinion
(enclosed), and we want to touch base with you to let you know where this
matter stands.
We have asked our Compliance
Auditing Section to get in touch with representatives of the XXXXX and XXXXX
for the purpose of helping them evaluate which of their sales may be
taxable. We appreciate how complex
sales tax laws have become and we welcome the opportunity to work one-on-one
with taxpayers like XXXXX to clear up misunderstandings. In the meantime, we will notify XXXXX that
their foods sales and other sales resulting in unrelated business income are
considered taxable pending the outcome of the compliance audit.
XXXXX supplied us a copy of your
letter to the XXXXX. In that letter is
a reference to your city’s obligation to collect sales tax on certain
transactions. We appreciate your taking
the time to discuss your sales transactions with our staff ensure that XXXXX is
in compliance. The Tax Commission has
recently put together an instructional publication for public schools on this
topic that should be a valuable resource in that arena.
We
look forward to producing a similar publication for use by state and local
governments officials after we have had an opportunity to review the typical
types of sales that are being made.
For
the Commission,
Alice
Shearer,
Commissioner
XXXXX
Re: Sales tax on sales made at the XXXXX
Dear
XXXXX
XXXXX, our Disclosure Officer, asked
us to issue an opinion regarding the tax status of sales made in connections
with the production “Utah” at the XXXXX.
As we understand your situation, the XXXXX has been granted exempt
status under the umbrella of the XXXXX.
On that basis, XXXXX has made sales of tickets, food and other items
without collecting sales tax on these transactions. The XXXXX has put you on notice that your sales may be subject to
sales tax.
Under section 59-12-104.1 (1) of the
Utah Code, sales by an charitable organization are exempt from sales tax if the
sale is made in conduct of the organization’s regular functions or
activities. It is not always easy to
distinguish when a charitable organization’s activities fall outside its regular
functions, but the Utah Code and administrative rules provide some
insight.
With regard to food sales, section
59-12-104 (14) of the Utah Code states that sales of meals served by a
charitable organization are exempt if the meals are not available to the
general public. Note that the organization
claiming exemption has two hurdles to overcome. First, the food must be served by the organization. Apparently, XXXXX has entered some type of
agreement with XXXXX to serve dutch oven meals and other foods sold through the
concession stands. It is not clear from
the information before us whether the food sales constitute meals served by the
exempt organization with XXXXX acting as XXXXX’s agent, or if XXXXX is making
foods sales in its own capacity, then paying XXXXX a commission, license fee or
contribution to XXXXX for the privilege.
Assuming that the sales are made by XXXXX, they still fail to pass the
second hurdle because the food items are available to the public. Therefore, the food sales are taxable.
From the information before us, we
do not have a clear picture of other sales made by XXXXX. It appears that the ticket sales for the
production are exempt because the sales are directly support XXXXX’s
educational function. Sales by XXXXX of
books or educational supplies to its students are also exempt. However, the exempt status. of other sales by XXXXX to the general
public is questionable. In general,
XXXXX must collect sales tax on any sales income arising from unrelated trades
or businesses and report that sales tax to the Tax Commission unless the sales
are otherwise exempted by law. Utah
Administrative Rule R865-19S-43 ties the term "unrelated trades or
businesses" to section 513 of the IRS Code. Therefore, if the organization is required to include receipts
from some of its sales in its taxable income for federal income tax purposes,
the activities that generated those receipts are ineligible for the sales tax
exemption unless some other exemption applies.
The information before us is incomplete
and we cannot properly evaluate your liability for past unpaid taxes or your
responsibility to collect sales tax in the future. Therefore, we have asked our Compliance Auditing Section to work
with you to make that determination. We
understand that you have already set your prices for the upcoming season on the
assumption that all of your sales are tax exempt. Normally, we do not consider “advertised prices” a sufficient
reason to avoid future tax liability.
However, we are happy to consider any argument that you raise on behalf
of XXXXX. In the meantime, you should
consider food sales and other sales which generate “unrelated business income”
to be taxable pending the outcome of your discussions with the Compliance
Auditing Section.
We look forward to helping you
resolve this issue.
For
the Commission,
Alice
Shearer,
Commissioner