99-004 Response May 4, 1999

99-004

Response May 4, 1999

REQUEST LETTER

January 5, 1999

Re: Request for Declaratory Judgment

Dear Irene:

We would appreciate your responding to the following question that has arisen, based on a change to Utah law enacted by the 1998 Legislature and made effective January 1, 1999.

Utah Code Annotated ("UCA") 59-2-405.1 was enacted by the 1998 Utah legislature effective January 1, 1999, to impose a statewide uniform fee in lieu of personal property taxes on motor vehicles weighing less than 12,000 pounds. As a result, vehicles in Utah will now be assessed on a uniform basis relating to their age and not to their fair market value.

We represent a rental car company ("Taxpayer") that will be required to pay the uniform fee on each vehicle it purchases. Taxpayer has asked whether it can pass a portion of the fee it is required to pay for the vehicles to its rental customers. Specifically, Taxpayer asks if it could charge a service fee of $1.00 per day per vehicle to reimburse Taxpayer for the uniform fee expense. The service fee would be identified as a fee for registration, titling or similar designation and not as a tax. Any amount collected from customers with respect to any one vehicle in excess of the uniform fee paid by Taxpayer to the State for that vehicle could, if you required, be accounted for and paid over to the State and not kept by Taxpayer.

In summary, we ask you for a declaratory judgment that the imposition of a service fee, not designated as a tax, of $1 per day per vehicle (or any other amount for that matter) is permissible under UCA '59-2-405.1 effective January 1, 1999, or other applicable statutes, and will not result in any violation of law, penalty, sanction or impropriety.

Our review of the law and our understanding of similar imposition of fees by rental car companies in other states leads us to conclude that what the Taxpayer intends to do would be permissible. We would appreciate your response regarding this question as soon as possible. Thank you for your assistance.

Very truly yours,

COMPANY

NAME

RESPONSE LETTER

May 4, 1999

RE: Advisory Opinion - Uniform Fee Paid on Vehicles Owned by A Rental Car Company

Dear NAME,

We have received your request for an advisory opinion concerning the uniform fee paid on rental vehicles in lieu of personal property taxes. You represent a rental car company (ATaxpayer@) that is required to pay Utah=s uniform fee on each vehicle it purchases. You ask if the Taxpayer can impose a charge of $1.00 (One Dollar) per day on its rental customers to reimburse the Taxpayer for its uniform fee expense.

Utah law imposes upon a vehicle owner a specific uniform fee on each vehicle sold. This specific fee is due from the owner and must be remitted to the state. When a transaction occurs where that vehicle is then leased or rented by the owner for a short period of time, Utah law does not require that a separate uniform fee be collected and remitted to the state. However, the statutes do not bar the rental car owner from charging his or her customer a rental price sufficient to cover all of his or her expenses, including the uniform fee expenses. Therefore, without violating any state law within the Tax Commission=s jurisdiction, the Taxpayer can charge its customer a rental price that either includes or separately states an amount to cover the uniform fee expenses incurred by the Taxpayer. The Tax Commission cannot give an opinion as to whether the Taxpayer=s proposed actions would violate any law outside its jurisdiction (i.e., Federal law, Uniform Commercial Code).

Please remember that if the Taxpayer does charge its rental customer any amount to cover its uniform fee expenses, this amount is considered part of the transaction price for the car rental, whether it is included as part of the rental price or stated separately. Accordingly, any amount charged to cover the Taxpayer=s uniform fee expenses is subject to sales tax and all other taxes applied to rental car charges. In addition, any amount that the Taxpayer charges its customers to recover its uniform fee expenses is not, unlike the imposition of sales tax, a charge required by the state. Accordingly, any uniform fee charge imposed by the Taxpayer should not be invoiced in a manner that suggests to the customer that the charge is imposed by the state. Also, the Taxpayer=s duty to remit the uniform fee on each vehicle is independent of any rental charges it imposes on its customers. The uniform fee is due in full at the time a motor vehicle, including a rental vehicle, is registered. Any rental charges imposed by the Taxpayer on its customers to recoup this expense should then be retained by the Taxpayer, not remitted to the state.