98-074
Response January 20, 1999
REQUEST LETTER
October 29, 1998
Dear Mr. Chapman:
We have recently made the attempt to begin a small
business. Our first attempt in such a venture on our own We request an Advisory
Opinion of a Utah State Sales Tax situation we
believe to be erroneously charged to us by a local business for services
being performed.
Each week we receive numerous video tapes from various
colleges and universities around the country. We assemble, categorize and judge
this footage and narrow it into one five-minute tape highlighting the best in
college football from around the country. We do not purchase these tapes from
the various institutions. Rather, they are sent to us voluntarily by various
Athletic Departments.
We pay a local video production facility to digitize
and assemble the footage, add music and sound effects, etc. They deliver a
finished product to us on a single video tape. We then uplink this tape via
satellite to television stations across the county free of charge to be used in
their sports segments on their nightly news or in their weekend sports
programming. Production costs here in Utah are paid by a single sponsor. We
don't sell or make the tape available for sale in any way, shape or form (we're
prohibited to do so by the NCAA).
We're currently being charged sales tax on all the
services provided by this local video production company-their services being
charged to us at an hourly rate. We wonder if this service is taxable under
these circumstances and if this may be exempt from Utah State Sales Tax.
Perhaps under the "Commercials, Films, Audio and Video Tapes" clause
or because this is a service similar to attorney's, consultant's, dentist's or
other professional fees.
If you have any questions or need additional
information or clarification on any aspect of this activity, please don't
hesitate to call me at #####.
Executive Director
RESPONSE
LETTER
January 20, 1999
RE: Advisory
Opinion - Sales Tax on Transaction with Video Production Facility
Dear NAME,
We have received your request for an advisory opinion
concerning the application of sales tax on a video that you have a local video
production facility (Aproduction company@)
put together for you. Your concern is
that sales tax should not be charged on this transaction, which consists of
your organization supplying the production company with a number of videos
tapes, parts of which are then assembled onto one tape as per your
instructions. You have specifically
asked whether this transaction is exempted from sales tax.
Utah Code Ann. '59-12-104(6)
provides a sales tax exemption for Asales
of commercials, motion picture films, prerecorded audio program tapes or
records, and prerecorded video tapes by a producer, distributor, or studio to a
motion picture exhibitor, distributor, or commercial television or radio
broadcaster.@ The production
company in your transaction has been contracted to perform some of the steps in the production process
for a video that your organization distributes for broadcast. As such, the Commission determines that the
production company is a producer and your organization is a distributor for
purposes of this sales tax exemption.
Thus, the transaction in question between your company and the
production company is exempt from sales tax.
Please contact us if you have any other questions.
For the Commission,
Joe B. Pacheco, CPA
Commissioner
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