98-067

Response January 4, 1999

REQUEST LETTER

January 14,1998

Dear Commissioners:

Regarding: Application of sales or use tax to expenses incurred by service providers.

It is our understanding that sales or use tax has traditionally been applied to expenses

incurred by service providers who travel to Utah from out of state to provide on-site

repairs and maintenance of machinery or equipment The rationale has been that these

expenses are included as part of the charge for repair labor. The types of expenses to which

we are referring are such things as airfare, vehicle rentals, meals, and lodging.

We would appreciate your reevaluating this view In our opinion billings for these kinds of

charges would be for reimbursements rather than for part of the labor charges. We

understand that in many instances you prefer not to separate charges that can be grouped

as a single transaction; however, we think this is an exception for the

following reasons:

1. Expenses are usually itemized separately, receipts included, from any

charges for repair or maintenance labor, and it is relatively easy to

distinguish reimbursement items from labor charges.

2. Most of the transactions related to expenses have already been subject to

sales tax.

Thank you for being responsive to our concerns.

Sincerely,

NAME

RESPONSE LETTER

NAME

COMPANY

ADDRESS

RE: Advisory Opinion - Sales Tax Application to Travel Costs Associated with Repair Charges

Dear NAME,

We have received your request asking the Commission to reverse its current policy regarding the general application of sales tax to travel costs when those costs are charged to a client in association with a repair charge. The Tax Commission interprets travel expenses as an element of the total charge for repair service. Accordingly, travel expenses, whether included in the bill as part of the repair charge or itemized separately, are considered an element of the total charge for repair, and the entire charge is taxable. The Commission declines a reversal of its current policy.

Please contact us if you have any other questions.

For the Commission,

Joe B. Pacheco, CPA

Commissioner

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