97-024
Response
April 24, 1997
REQUEST
LETTER
Dear
Ms. Rees,
XXXXX
designs, manufactures, and installs ski lifts in Utah and is responsible to
collect and pay the appropriate sales tax. In the past we have assumed that the
entire lift would be considered the passenger tramway" for the purpose of
establishing its tax exempt status under current State Tax Regulations. It has
been brought to our attention during a 1996 tax audit that the foundation concrete
for the towers and terminals might be considered real property and not subject
to the ski lift sales tax exemption.
We
have signed chair lift contracts for installation in 1997 and need to clarify
this point to our customers. Currently the tax has not been included in the
contracts nor do the customers know they will be liable for the tax on a
portion of the project cost. I would like to request that you have the chair
lift foundation issue reviewed and give me an advisory opinion we can use for 1997
projects.
If
you need more information please give me a call.
Thank
you for your help on this matter.
Sincerely,
XXXXX
RESPONSE LETTER
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion - Ski Resort sales tax exemption on passenger tramways
Dear
XXXXX,
We have received your request for
tax guidance concerning the sales tax exemption for passenger tramways install
at ski resorts. We offer the following:
The sale to a ski resort of a
passenger tramway, as defined by section 63-11-38 of the Utah Code, is exempt
from sales tax. “Passenger tramway”
means two-car or multicar aerial passenger tramway; chair lift, J-bar, T-bar,
or platter pull and rope tow.
Passenger tramways operate in
conjunction with towers secured in or to concrete foundations. The question of whether the concrete
foundations become real property upon installation is important because the
contractor who sells and converts an item of personal property to real property
is regarded as the final consumer of the personal property. Utah Admin. Rule R865-19S-58. As the final consumer of the item, the
contractor is liable for the sales tax on his purchase of that item. The contractor’s customer has no tax
liability because the customer is buying real property, which is not subject to
sales tax.
The legislature has authorized
contractors to purchase construction materials tax free only in a limited
circumstance. If the contractor
purchases the materials on behalf of a public school and converts those
materials to real property owned by the school, the contractor need not pay
sales tax on the purchase of those materials.
The legislature has not enacted an equivalent exception for contractors
installing ski resort improvements.
Therefore, if your company purchases construction materials on behalf of
the ski resort and converts them to real property, your company is liable for
the tax. Likewise, if your company
purchases the items tax free for resale, then sells and installs any of
the items so as to convert them to real property, your company will be liable
for the tax on those items. To avoid
this outcome, the ski resort should purchase the cement directly from the
cement company or supplier, and not from your company. The cement purchases will be exempt if:
1. the
ski resort makes payment for the materials directly to the vendor; and
2. establishes that materials purchased
were used to construct a qualifying passenger tramway.
When the auditors raised this issue
with you, they may have questioned whether the cement foundations are part of
the tramway within the meaning of this exemption. We conclude that the
foundations which secure the tramway are an integral part of and appurtenant to
the tramway. Therefore, if the cement
used to build the tramway foundations is purchased directly by the ski resort,
the exemption applies.
Please let us know if you have other
questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner