99-018
Response July 19, 1999
REQUEST
LETTER
(E-mail request)
99‑018
NAME
ADDRESS
Are real estate leases in Utah subject to sales
tax? My company leases certain sites on
which are located cell phone towers. We
are having difficulty determining if we need to be paying sales (or any state)
tax.
Specifically we need to know whether:
1. Is the
rent that we pay to the owner of the land where we have a cell phone tower
subject to any tax in your state?
2. Is the
rent we collect from other carriers collocating on the tower subject to any
tax?
3. Does
this issue turn on the definition of tangible personal property v. rental of
real property? And how are those terms
defined in your state?
4. What,
if any, is the tax schedule that we might be obligated to remit and
5. If we
are determined to be subject to such tax, what is the procedure we would need
to follow to comply with the relevant statute or rules.
6. If you
are not the property entity to answer these questions can you either refer it
on to the appropriate office or advise me where I might obtain the information?
Thanks very much for your help.
RESPONSE
LETTER
July 19, 1999
NAME
ADDRESS
RE: Taxation
of Site Leases for Cell Phone Towers
Dear NAME,
We have received you request for information as to
whether sales tax is due in Utah on leases of sites on which cellular phone
towers are located. We will first
address the leasing question, and then other sales tax liabilities that may
arise concerning the sites.
Sales Tax on Leases. Utah law imposes a sales tax
on the sale or lease of tangible personal property, but not on the sale or
lease of real property. While Areal property@ is
not defined for purposes of the Utah=s
Sales and Use Tax Act, Utah Code Ann. '59-12-102(25)
does define Atangible personal property@ to include Aphysically
existing articles or things, including property severed from real estate.@ ATangible personal property@ is further defined as not including Areal estate or any interest or improvements in real
estate.@ Thus, if your
company only leases the land on which you then build a cellular phone tower,
this lease is not subject to sales tax.
However, if your company leases a cellular phone tower
that belongs to another party or leases all or portion of its own tower to
another party, such a lease is taxable if the tower is considered to be
personal property. The lease is
nontaxable if the tower has become part of the real estate. Whether an item of personal property, upon
attachment to the real estate, remains personal property or becomes part of the
realty depends upon the individual circumstances surrounding that personal
property, with particular emphasis on its attachment to the real property. You have indicated by telephone that when a
cellular phone tower is built, a concrete platform is installed to which the
tower itself is attached. The tower is
designed and attached to the platform in such a manner that it can then be
removed and used on another site, if necessary.
While the Commission has never before specifically
addressed whether a cellular phone tower is affixed to the realty in such a way
to make it part of the realty, we have determined that other similar
structures, such as power transmission towers, are considered real property for
sales tax purposes. Accordingly, we
believe that cellular phone towers, such as those you describe, should also be
considered real property upon their attachment to the realty. As a result, any lease of all or a portion
of a cell phone tower would be the lease of real property and, thus, a
transaction that is not subject to sales tax.
Sales and Use Taxes on Purchases. Sales tax is
due on the sale of tangible personal property.
If you purchase a cellular phone tower that has already been built and
installed on the concrete pad, sales tax is not due on the purchase price paid.
If you instead build a cellular phone tower on a site
you have leased, there are specific sales tax liabilities associated with the
purchase of the materials incorporated into the tower. These specific requirements are found in
Utah Admin. Code R865-19S-58 and detailed in Utah State Tax Commission
Publication 42. Generally, the last
person to own tangible personal property before it is converted to real
property is liable for sales tax on the purchase of that personal
property. As the concrete platform and
the tower itself are converted to real property, the last person to own the
materials incorporated into the platform and the tower must pay sales tax on
the items. If your company purchases
these items, it must pay sales tax on them.
If your company instead hires a contractor to build the platform and
tower and the contractor purchases these items, the contractor must pay sales
tax on these items. The contractor
would not charge you sales tax on his or her charges to you for the concrete
platform or tower, as this would be considered a sale of real property.
In addition to the above-described sales tax on items
purchased in Utah, your company would be subject to a use tax on items
purchased in another state and shipped into Utah to be incorporated into the
concrete platform or the cellular phone tower in Utah. However, your company would also be entitled
to a credit against the Utah use tax for any sales or use tax properly first
due and paid on these items in another state.
Collecting and Reporting Sales Tax. In Utah,
it is the vendor, defined in Utah Code Ann. '59-12-102(29)
as any person receiving any payment or consideration upon a sale of tangible
personal property or to whom such payment or consideration is payable, who is
responsible for collecting sales tax from the purchaser.
Any vendor who is required by law to collect and remit
Utah sales and use tax must obtain a Utah sales tax license and identification
number. To obtain a sales tax license,
the vendor must submit a completed Form TC‑69 to the Tax Commission. (If
the vendor fails to collect the tax from the purchaser, the vendor is still
liable to the state for the tax. The
purchaser, however, is also liable for the tax, and the Tax Commission may
collect the tax from either the vendor or purchaser.)
While we have discussed some of the issues concerning
the application of sales and use tax to transactions involving cellular phone
towers, your company may also be liable for other Utah taxes related to owning
or leasing towers in Utah, including income or corporate franchise taxes and
property taxes. Please contact us if
you have any other questions.
For the Commission,
R. Bruce Johnson
Commissioner
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