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The Utah State Tax Commission has revisited a private letter ruling that discusses the application of Utah sales tax to a corporation’s sale of a software-supported automobile dealer management service and associated services. Although the original letter ruling found the associated services to be taxable, the newly described facts indicate that set-up and training fees charged to customers are not taxable. Since the services are separately-stated on the invoice, optional to the client, and because some clients utilize other companies for these services or use the instructions provided by the seller to perform the services themselves, they are not “necessary to complete the sale”, and,, therefore, should not be included in the purchase price.

The Tax Commission determined that separately-stated custom programming and forms programming fees charged to customize the software are not taxable, because such charges are not included in the definition of “prewritten software”. Separately contracted for support fees were also found to not be taxable because they are not among the specifically enumerated taxable services, and because the support fees did not relate to installing, enhancing, or upgrading prewritten computer software.

However, since the Tax Commission still holds that the software-supported automobile dealer management service is “prewritten software”, it denied the corporation’s request to rule that application service fees and monthly licensing fees to access the software-supported service were also not taxable. (Private Letter Ruling, Opinion No. 08-002, Utah State Tax Commission, amended July 10, 2009)


In a private letter ruling, an out-of-state telemarketing firm, with its sole call center in Utah, was determined to have nexus. The Commissioner also concluded that the firm’s clients, who actually sold the service and maintenance contracts, had nexus as well. The telemarketing firm contended that it did not have nexus because its sole activity was solicitation by e-mail and telephone from the call center in Utah. However, the Commissioner found that the taxpayer’s activities were not just limited to solicitation. The maintenance of a call center in Utah also requires either owning or leasing real property, registering with the Department of Commerce, as well as hiring employees. As a result, the combination of both activities was sufficient to create nexus for the firm. The firm also insisted that nexus was not created for its clients because the firm’s solicitation did not establish and maintain a market for the out-of-state clients. This was also denied because the firm is acting as an agent or independent contractor by soliciting sales. In Utah, an agent or independent contractor with nexus acting on behalf of a seller creates taxable nexus for the seller. (Private Letter Ruling, Opinion No. 08-006, Utah State Tax Commission, released May 2009)


Utah has passed legislation to amend the Sales and Use Tax Act relating to determining the location of the sale, lease, or rental of a service transaction if the receipt of an order and the receipt of tangible personal property or a product transferred electronically take place within the state. Under the new provisions, a seller may elect to determine the location of a service transaction that is conducted in such a way that is subject to the bill. (H.B. 58, Laws 2009, effective July 1, 2009)


While the exemption for sales of aircraft parts and equipment to entities described in North American Industry Classification System Code 336411 (Aircraft Manufacturing) or 336412 (Aircraft Engine and Engine Parts Manufacturing) was amended to limit the period from July 1, 2008 to September 30, 2008, the exemption was also amended to include sales of parts and equipment for installation in an aircraft operated by a common carrier in interstate or foreign commerce. A refund may be claimed before September 30, 2011 for sales made on or after July 1, 2008 but on or before September 30, 2008 provided the exemption had not already been claimed. Effective October 1, 2008, the exemption on sales of aircraft parts and equipment will extend beyond those entities described in codes 336411 and 336412. ( H.B. 2001, Laws 2008, Second Special Session, effective September 29, 2008, operative retrospectively to July 1, 2008)


Effective May 5, 2008, Utah legislation has enacted the Professional Employer Organization Licensing Act under the Utah Insurance Code. As part of the Act, a covered employee whose service is subject to a sales or use tax is considered the employee of the client for purposes of imposing and collecting the tax on the service performed by the employee. However, the Act may not be interpreted to relieve a client of sales or use tax liability.

Tax shall be assessed on a per capita or per employee basis on a client for a covered employee, and on the professional employer organization for an employee of the organization who is not a covered employee coemployed with a client. If the tax amount is determined on the basis of the gross receipts of the professional employer organization, only an administrative fee collected by the organization is considered gross receipts. If the tax is imposed on the basis of total payroll, the professional employer organization is eligible to apply for a small business allowance of exemption available to the client for a covered employee for the purpose of computing the tax. (H.B. 169, Laws 2008, Effective May 5, 2008)



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