98-006
Response January 30, 1998
January
13, 1998
Dear
Ms Rees:
Earlier
this morning you spoke to NAME of the COMPANY
about the upcoming COMPANY A Convention in CITY at the end of May, 1998
which is estimated to be attended by approximately 1500 attendees. As per your
advice, I am requesting an Advisory Opinion from your office concerning the
retention of tax exempt status if attendees use their Corporate charge cards
for hotel expenses. The organization has been declared tax exempt by the Utah
tax commission. Our number is XXXXX. Several of the local hotels referred us to
your office for a decision on the matter.
The
VISA charge card is issued from BANK and has the name of the individual as well
as the name of the organization. The Corporate Card is a Charge Card, not a
credit card. Billing is directly to the individual. All purchases must be made
for legitimate business expenses.
Our
timeline is closing in and information about the Convention will be going out
in the next two weeks. I would like to thank you in advance for your prompt
attention. I can be reached by phone at XXXXX or by fax at XXXXX.
Sincerely,
NAME
January
30, 1998
NAME
ADDRESS
CITY,
STATE ZIP
RE:
Credit card use and tax exemption
Dear
NAME,
We received your request concerning credit
card purchases made by employees of the COMPANY A. As indicated in your letter, credit cards are issued to employees
of the COMPANY A showing both the name of the employee and the organization. In addition, all employees are instructed to
only use the card to make legitimate business purchases, and the credit card
bill is sent directly to the employee for payment. The issue is whether purchases made under these circumstances are
taxable.
Utah recognizes that the COMPANY A
has qualified as a charitable institution, and as such, is exempt from taxation
on its purchases. Utah Code Ann. §59-12-104.
However, exempt entities receive the exemption only if the purchases are
paid for directly by the exempt entity.
Where an employee pays for a purchase and then is reimbursed by an
exempt entity, the purchase is subject to taxation. The result is the same whether it is a charge card or a credit
card that is used. Should your
employees make purchases in Utah using the credit cards described in your letter,
those purchases will be subject to taxation.
On the other hand, COMPANY A would
be entitled to the sales tax exemption should the employees’ hotel expenses be
paid for with either a check from the organization or a credit card that is
billed directly to the organization.
Please let us know if you have any
other questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
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