97-066
Response
November 18, 1997
REQUEST
LETTER
October
20, 1997
Re: Request for Advising Opinion
Dear
Ms. Rees:
Please consider this a request for
an advisory opinion. I represent COMPANY A (“COMPANY A”) which has just received
a Utah tax number for sales and withholding and is about to conduct business in
the state of Utah. COMPANY A is in the
advertising business. Its clients are
businesses interested in participating in a local advertising campaign through
the medium of a coupon booklet. The
coupon booklet consists of various pages which are called “mini-billboards”
which advertise the name of a particular business and the services and/or
products it sales. Each “mini-billboard” is in the form of a coupon which displays
the name and address of the local business and also contains an inducement to
visit the business. The inducement
takes the form of an offer to perform some service for free (or at a reduced
rate) or to provide some products or goods for free (or at a reduced price)
upon presentment of the coupon. The
individual coupons are bound together in the form of a booklet.
COMPANY A arranges for the design of
the advertisements, the printing, and the distribution of the “coupon
booklets.” COMPANY A then sells the coupon booklets to the public for a price.
We would like to clarify the status
of the sale of these coupon booklets to the public for
purposes
of the Utah sales and use tax. It would appear that the matter is covered by
Sales and
Use
Tax Policy Notice #81-3 which provides, in part: “Some promoters put together
coupon
books
that offer discounts for various businesses (i.e. Happening Books) for sale and
distribution
to
the general public. These promoters or advertisers should pay tax on their
printing costs of
the
actual coupon book. The sale of the
coupon book by the promoter or some organization is
not
considered the sale of tangible personal property and is not subject to the
sales tax. When
the
participating merchants honor the coupons, sales tax should be determined as
previously
explained."
(Copy attached for reference as Exhibit “A”).
Idaho has a sales and use tax
structure which is similar to that of Utah.
The State Tax Commission of Idaho has ruled that the sale of these
coupon booklets is not the sale of tangible
personal
property because: “individuals who purchased COMPANY A's coupon books do not
seek
the books themselves as the object of the transaction. Instead, they seek the intangible right
to
obtain the advertisers product or service at the discount provided or, if
provided in the coupon, for free. For
this reason, the purchase of the books is not the purchase of tangible personal
property under the general provision of Idaho Code Section 63-3612.” Idaho State Tax
Commission
Declaratory Ruling, Docket No. 11622 at page 3. A copy of the Declaratory Ruling is attached for your reference.
It is our belief that under Utah law
the sale of the coupon books is not subject to Utah
sales
tax. We request that you confirm that
the sale of the coupon books in the state of Utah by
COMPANY
A does not give rise to Utah sales or use tax.
If you require any additional
information,
please contact me at your earliest convenience. We look forward to receipt of your
advisory
opinion.
Yours
truly,
NAME
November
18, 1997
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion - Application of sales tax to sales of coupon booklets.
Dear
NAME,
We have received your request for
sales tax guidance pertaining to the sales of coupon booklets. For purposes of this opinion, we assume that
COMPANY A only publishes the coupon booklets and that it is not also a vendor
of the products advertised. We offer
the following guidance:
The Tax Commission does not consider
the sale of coupon booklets to be taxable.
However, the printer, publisher, advertiser or vendor must pay sales tax
on its costs incurred in Utah to purchase materials or print the booklets.
Please let us know if you have
additional questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
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