97-030
Response
May 12, 1997
DEAR
MRS. REES.
I
AM THE PRESIDENT OF THE COMPANY A IN
SALT LAKE MY ACCOUNT NUMBER WITH YOU IS ####.
I
HAVE HAD A SALES TAX PROBLEM COME UP WITH THE COMPANY B. AS YOU MIGHT KNOW THE
COMPANY C AND THE COMPANY B MERGED IN JANUARY OF THIS YEAR. I HAVE BEEN
TRANSPORTING THE COMPANY C CREWS IN THE STATE OF UTAH AND SURROUNDING STATES. I
HAVE BEEN COLLECTING AND PAYING SALES TAX ON MY REVENUES SINCE SENATE BILL 50
IMPOSED THE TAX ON TRANSPORTATION.
ON
APRIL 1 OF THIS YEAR I WAS TOLD TO SUBMIT MY BILL TO A COMPANY CALLED COMPANY
D. AT NAME,ADDRESS,CITY, STATE, ZIP. THEY HANDLE TRANSPORTATION AND LODGING
BILLING FOR THE COMPANY B. I CALLED THEM ABOUT MY MARCH BILL AND THEY INFORMED
ME THAT THE COMPANY B DID NOT HAVE TO PAY THIS SALES TAX THERE IS ANOTHER
COMPANY IN SALT LAKE DOING THE SAME WORK AS DO BY THE NAME OF COMPANY D. THEIR
PHONE NUMBER IN SALT LAKE CITY ##### AND ANOTHER PHONE NUMBER IN XXXXX #####.
THEY HAVE ABOUT TEN VANS STATIONED IN XXXXX AND THE XXXXX AREAS. THEY ALL HAVE
XXXXX LICENSE PLATES ON THEM SO I ASSUME THEY ARE NOT PAYING PROPERTY TAXES IN
UTAH OR PAYING FOR LICENSE PLATES EITHER.
IF
COMPANY D IS NOT PAYING THE SALES TAX I CERTAINLY CANNOT COMPETE WITH THEM AND
I WILL HAVE TO SHUT MY BUSINESS DOWN. I DON’T BELIEVE THIS IS FAIR. I HAVE
ABOUT $$$$$ INVESTED IN EQUIPMENT AND WOULD LOSE MOST OF THAT INVESTMENT IF I
SHUT DOWN. IF WE ARE UNABLE TO STRAIGHTEN OUT THIS TAX QUESTION I WILL OUT OF
BUSINESS SOME TIME NEXT WEEK. I KNOW YOU ARE VERY BUSY BUT IF I CANT GET YOUR
HELP EITHER THEY ARE LIBEL FOR THE TAX OR THEY DO NOT HAVE TO PAY THE TAX I
WILL BE GONE NEXT WEEK. I WOULD APPRECIATE SOME KIND OF A RULING RIGHT A WAY.
IT
MIGHT BE WORTH YOUR TIME TO CONTACT XXXXX OF COMPANY D AT #####.
PLEASE
CALL ME AT ##### IF YOU HAVE ANY QUESTIONS OR FAX ME AT #####.
SINCERELY.
NAME
May
12, 1997
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion - Taxation of transportation charges
Dear
NAME,
We have received your request sales
tax guidance with regard to your company’s charges for interstate and
intrastate transportation. We understand
that COMPANY B is your only customer and that your vehicles are one ton
Chevrolet vans.
The taxation of transportation
charges has changed over the past few years.
Although you are specifically interested in charges for March of this
year, we address these changes in sequence to help you determine the tax status
of your charges over the passed few years and to alert you to an exemption that
becomes effective on July 1, 1997.
In 1994, the Utah Legislature
imposed sales tax on charges for intrastate passenger transportation. (See Tax Bulletin 22-94, enclosed.) Fares for interstate transportation were
considered non-taxable.
In 1995, the U.S. Supreme Court
issued a decision which stated that even interstate transportation could be
taxed if the fare was sold within the state and at least part of the service
was delivered in the state. In response
to that decision, the Tax Commission issued Tax Bulletin 8-95 to alert
transportation providers of the change pertaining to their interstate charges. (See Tax Bulletin 8-95, enclosed.)
Congress immediately reacted to the
supreme court decision by passing a bill which exempted interstate passenger
transportation from taxation by the states.
The Tax Commission issued Tax Bulletin 9-96 to rescind Tax Bulletin
8-95. Effective January 1, 1996,
interstate transportation, as defined in Tax Bulletin 9-96, was again tax
exempt. Intrastate transportation
remained taxable.
The 1996 state legislature passed an
exemption for intrastate passenger fares by taxicabs, as defined in
classification code 4121 of the Standard Industrial Classification manual. The manual defines taxicabs as
establishments which provide passenger transportation by automobiles, not
operating on regular schedule or between fixed terminals. Automobiles and buses running to, from or
between airport and rail terminals do not fall within this classification, nor
do chartered bus services. Because your
service operates on regular schedules between fixed points, and because it
operates as a private carrier pursuant to a contract like a chartered
transportation service, this exemption does not apply to the charges at issue
here.
The 1997 state legislature passed an
exemption for amounts paid by an employer under a written contract with a party
who provides intrastate transportation for the employer’s employees to or from
the employer’s primary place of business.
This exemption, which becomes effective July 1, 1997, creates an
exemption for intrastate passenger service that was not already exempt under
the 1996 exemption. (See H.B. 84,
enclosed.)
To summarize, for the period from
July 1, 1994 to July 1, 1997, your charges for intrastate transportation are
taxable. Charges for interstate transportation,
as described in Tax Bulletin 9-96, are nontaxable. Beginning July 1, 1997, your intrastate charges will be
nontaxable as well.
You mentioned that COMPANY B’s
representative believes all of the transportation at issue here is exempt under
the theory that it is a “continuation of interstate transportation.” We disagree. Your company has not been engaged to deliver passengers or goods
as part of a continuing interstate transportation contract. Your company delivers COMPANY B’S employees
from one point in Utah to their place of work in Utah. The fact that the employees may thereafter
leave the state does not render your service interstate transportation. To the
extent that your transportation service is delivered wholly within Utah, it is
taxable until the July 1997 exemption becomes effective. If COMPANY B wishes to challenge our
position on the “continuation of interstate transportation” issue, they may do
so by petitioning for a declaratory order.
In the meantime, COMPANYB must remit the tax to you as required by
law. If they are successful on appeal,
we will refund the tax to them directly.
Please let us know if you have other
questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner