97-042

Response July 7, 1997

REQUEST LETTER

June 24,1997

RE: Advisory Opinion Dear Ms. Rees:

I am a Utah CPA who is working with a client that has a sales tax question concerning the

Tourism-Short Term Rental Tax and the Motor Vehicle Rental Tax of Utah Code Sections 59-12-603 and 59-12-901.

The taxpayers operate a timeshare business that provides large motorhome vehicles to customers on an extended contract basis. Each customer signs a 10 year timeshare agreement that allows the customers to use the vehicle for 6 days each year for the entire 10 year term (the customers do not own any portion of the vehicle). Consequently, the arrangement provides for 60 days usage spread over a 10 year term. The customers pay $1,500 at the inception of the agreement and $700 each year thereafter for the remainder of the 10 year term.

We are asking for clarification of the 30 day rental exception to the Tourism-Short Term

Rental Tax and the Motor Vehicle Rental Tax. Since the agreement is a legal commitment to provide a vehicle for 60 days, we believe the Tourism-Short Term Rental Tax and the Motor

Vehicle Rental Tax should not apply to the payments received under the contract.

If you should need additional information, please do not hesitate to call me at #####. Otherwise, please forward your response to the address indicated above. Thank you for considering this matter.

Very truly yours,

NAME

RESPONSE LETTER

Advisory Opinion - Tax on short-term vehicle rentals

Dear NAME,

We have received your request for tax guidance as to whether the taxes imposed under sections 59-12-603 and 59-12-901 apply to time share agreements for motor homes. We offer the following:

Section 59-12-603 is part of the tax used to fund the development of tourism, recreational areas, and convention sites. The “tourism” tax is imposed on customers of businesses which operate in whole or in part in the tourism or recreation industries. Section 59-12-603 imposes a tax on customers who rent motor vehicles for 30 days or less.

Section 59-12-901 is imposed for the purpose of funding Utah’s transportation corridor. The same vehicles that are subject to the tax imposed under 59-12-603 are subject to the tax imposed under 59-12-901.

With regard to the timeshare arrangement referenced in your request, we consider the vehicle rentals to be subject to both taxes. The customer’s contract with your client is not a ten year lease of a vehicle. In fact, the customer most likely will have use of a different vehicle each year. Instead the agreement is merely a commitment by the customer to rent a vehicle each year for 10 years. The agreement does not cover one 10-year rental. It covers 10 short-term rentals.

Each use is less that 30 days, so the rental is considered a short-term rental within the meaning of these statutes.

Please let us know if you have other questions.

For the Commission,

Joe B. Pacheco,

Commissioner