97-074
Response December 23, 1997
November
18, 1997
Subject: Request for an Advisory Opinion
Regarding the Municipal Energy Sales & Use Tax (House Bill 461)
Dear
Ms Rees:
I
was directed to your office by NAME on a question that arose during our filing
of the
newly
imposed Municipal Energy Sales & Use Tax effective 1 July 1997.
We
request an advisory opinion on whether this tax is appropriate on energy
consumed by the
COMPANY
A has a Facility Use Contract with the U.S. Navy that stipulates that COMPANY A
will maintain these government owned facilities on behalf of the U.S. Navy on a
rent-free basis. This arrangement is common to the aerospace business whereby
the government owns real property (bldg./land) and the contractor operates the
facilities as part of contracts with the government agency. This is known as a
COMPANY B facility.
Based
on the above, we request you give us an advisory opinion on whether or not the
U.S. Government is exempt from payment of Municipal Energy Sales & Use Tax
enacted in House Bill 461 during the 1996 Utah Legislative session.
We
believe that the U.S. Government is exempt under exemption #4 contained in the
Financial
Services
letter of 20 October 1997 to NAME.
We
would appreciate your opinion on this matter at your earliest convenience, but
prior to our next filing. If you have additional questions please contact
myself at XXXXX or NAME at XXXXX.
Sincerely,
NAME
December
23, 1997
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion - Exemption from Municipal Energy Sales and Use Tax
Dear
NAME,
We have received your request for
tax guidance pertaining to the Municipal Energy Sales and Use Tax. We offer the following:
Secton 10-1-305 allows
municipalities to impose the municipal energy sales and use tax on businesses
within its municipal limits with certain exceptions. You do not specify how the the energy is used in your facilitiy,
but we assume that you are claiming exemption under section 10-1-305 (2) (b) (ii), which exempts “the sales and use
of the taxable energy that the municipality is prohibited from taxing under
federal law or the Constitution of the United States or the Utah
Constitution.” Sales made directly to
the federal government are tax exempt or to a purchaser who is acting as a
purchasing agenct for a federal entity.
To be considered an agent of a federal entity within the meaning of Utah
Administrative Rule R865-19S-91 (copy enclosed), your company must be so
closely aligned with the federal entity that it can only be viewed as operating
as an arm of that entity. The conditions
of agency are described in subsection B of the enclosed rule.
Nothing in your letter leads us to
conclude that you are operating as a purchasing agent for a federal
agency. The mere fact that your company
is operating in a facility that is owned by the federal government is not
enough to claim this exemption. You
must demonstrate that your company meets the conditions for exemption stated in
R861-19S-91.
Please let us know if you have other
questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
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