98-003
Response January 27, 1998
(E-mail
from NAME)
I
received a call from NAME. She
expressed concern that car washes vary in whether or not they charge sales tax when
fees are taken by a gas station attendant or through debit or credit cards at
the pump.
I
have gotten varied answers from customer service and audit on how the tax is
imposed in these situations.
NAME
is eager to get a written answer on this issue and currently on her way out of
town. Therefore, I would like to
request an advisory opinion on her behalf.
It can be mailed to
THANKS
NAME
January
27, 1998
NAME
ADDRESS
CITY
STATE ZIP
Advisory
opinion - sales tax exemption for car washes
Dear
NAME,
We have received your request for
information concerning the sales tax exemption for coin-operated car washes
provided under Utah Code Ann. §59-12-104(45).
Your request specifically concerns whether car washes are exempt when
the fees are taken by a gas station attendant or through debit or credit cards
at the pump.
As background, a sales tax exemption
on coin-operated car washes was removed from Utah law in 1994, but was
reenacted in 1996 after the car wash industry presented evidence that the
exemption was detrimental to the industry.
Presented to the Legislature was evidence showing that, without the
exemption, coin-operated car washes had two choices: (1) either to maintain the
price for a car wash and have the car wash owner pay the tax, hence greatly
decreasing net revenue; (2) or to increase the car wash price by 25 cents to
cover the sales tax, which was shown to cause a significant decrease in gross
revenue. When asked by NAME why coin-operated
car washes should receive the exemption when non-coin-operated ones would not,
the industry spokesman responded that it was easier for a cashier to collect
the tax than to adjust the coin-operated machines to handle the increase. The Legislature’s enacted an exemption for
sales of cleaning or washing of tangible personal property by a coin-operated
car wash machine.
For these reasons, the exemption has
been applied to those sales where it is impractical for the car wash owner to collect
the sales tax. Thus, where the car wash
is activated by inserting coins into the machine, the transaction is exempt
because the machine cannot practically be adjusted to collect the tax. On the other hand, where a cashier or
attendant collects the fee for the car wash, the transaction is taxable because
the cashier can easily collect the sales tax.
Similarly, the transaction is taxable where the cashier sells the
customer a token that activates a coin- operated car wash because the sales tax
can easily be collected. Lastly, where
the car wash fee is collected through a debit or credit card at the pump, the
sale is taxable because these devices can be programmed to easily collect the
sales tax, much like a cashier can.
Please let us know if you have other
questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
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