Were charges to install and maintain cable or fiber-optic lines on utility poles subject to Utah sales tax when the customer supplied the materials?

Plain-English summary

Utah Private Letter Ruling 00-008 said a cable construction company's labor to install customer-supplied wire or fiber-optic cable on utility poles was not subject to Utah sales tax.

The Commission treated the poles as real property and said attaching personal property to real property was a nontaxable transaction.

It also treated maintenance of the installed system as nontaxable on the assumption that the attached wires and cables had become part of the realty.

The ruling warned that maintenance would be taxable if the attached cables remained tangible personal property.

The proposed work

The company constructed, upgraded, and maintained cable television systems for local franchisees.

For the Utah project, it expected to install wire or fiber-optic cable on poles owned by power or telephone companies.

The cable franchisee supplied and owned the wire and other materials. The contractor supplied labor and installation expertise.

The described work did not include cable “drops to homeowners.”

Installation on utility poles

The Commission said telephone and power-transmission towers, including poles, were real property for sales-tax purposes.

Services that attached wire or fiber-optic cable to that real property were nontaxable, whether or not the installed cable itself became part of the realty.

The company's described installation charges therefore were not subject to Utah sales tax.

Maintenance depended on property classification

The request also mentioned maintenance without describing it in detail.

The Commission assumed the company maintained wires and fiber-optic cables already attached to the utility poles.

Utah Code Ann. § 59-12-103(1)(g) taxed repairs or renovations of tangible personal property. Maintenance therefore would be taxable if the attached wires or cables remained personal property.

But the Commission generally considered wire and cable attached to telephone and power-transmission poles to have become part of the realty. Without contrary facts, it treated maintenance of those systems as nontaxable.

Holding

For the described work:

• Installing customer-supplied wire or fiber-optic cable on utility poles was nontaxable.
• That installation result applied whether or not the cable became part of the real property.
• Maintenance was nontaxable on the Commission's assumption that the installed system was real property.
• Maintenance would be taxable if the wire or cable remained tangible personal property.
• The ruling did not analyze drops from the transmission system into subscribers' homes.

What this means for you

Cable and telecommunications contractors

Separate installation from later repair or maintenance and document what property is being worked on. The maintenance result can change with the property's classification.

Utilities and cable providers

Customer ownership of the materials did not make the installation labor taxable in the described arrangement. The Commission focused on attachment to utility-pole real property.

Accountants and tax professionals

Confirm whether installed equipment becomes real property under current Utah rules. Do not extend this ruling to subscriber drops or materially different infrastructure without separate analysis.

Common questions

Q: Was labor to install cable on utility poles taxable?

A: No. The Commission treated attaching the cable to real-property poles as a nontaxable service.

Q: Did it matter that the customer supplied the wire and materials?

A: The ruling included that fact, but its stated installation rationale was attachment of personal property to real property.

Q: Was maintenance taxable?

A: Not on the Commission's assumption that the attached wires and cables had become real property.

Q: What if the cable remained tangible personal property?

A: The Commission said maintenance would then be taxable as repair or renovation of tangible personal property.

Q: Did the ruling cover cable drops into homes?

A: No. The request expressly excluded those activities.

Key source language

• Installation: “Services to attach personal property, such as wire and fiber optic cable, to real property are nontaxable transactions.”
• Property assumption: “the Commission generally considers wires and cables attached to telephone and power transmission poles to have become part of the realty.”
• Maintenance result: “Based on that understanding and without facts indicating otherwise, we would consider these systems to be real property.”

Citations and references

• Utah Code Ann. § 59-12-103(1)(g)

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 00-008
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

00-008

Response April 26,
2000

REQUEST LETTER

February 28, 2000

Dear Ms. Reese:

Our company is anticipating bidding a project in the CITY, UT area. The project consists of outside plant construction for COMPANY B. We would like to request as advisory opinion as to whether our revenues are subject to sales tax. It is our understanding that generally labor is not taxed, therefore we would not owe sales tax on our revenues in your state. Listed below is a general description of the labor services our company performs.

COMPANY is a cable television construction company. In the course of its nationwide business, COMPANY usually contracts with local franchisees of COMPANY B for the installation of cable television systems. COMPANY constructs or upgrades a system for the franchisee, and also performs certain maintenance on existing systems.

COMPANY typically installs wire or fiber optic cable on poles owned by a power company or a telephone company, subject to an agreement with the utility company. The wire is owned by the franchisee, not COMPANY. The franchisee supplies the wire and all other materials, and COMPANY supplies the labor and installation expertise. These installation activities do not involve "drops to homeowners."

I have spoken with NAME regarding this issue and he has indicated that our revenues would be exempt from sales tax. COMPANY will accept NAME'S determination as factual unless we hear otherwise from you.

If you have any questions or require any further information, please feel free to contact me at the number listed below

Sincerely,

NAME

RESPONSE LETTER

April 26, 2000

NAME

RE: Taxation of Installation Services

Dear NAME,

You have requested an advisory opinion concerning the taxability of certain services performed by COMPANY. (COMPANY@) for cable television providers. You state in your letter that COMPANY installs wire or fiber optic cable on poles owned by power or telephone companies. COMPANY does not supply the wire, installation materials, or other personal property used in the installation, as these materials are supplied by the cable television providers. In addition, COMPANY'S installation activities do not involve "drops to homeowners," which we understand to be the installation of wire or cable from the transmission lines or delivery system into the cable subscriber=s home. Lastly, you indicate that COMPANY also performs Acertain maintenance on existing systems.@

Installation of wire or fiber optic cable. You install wire or fiber optic cable onto poles owned by power or telephone companies. The Commission has previously found that telephone towers and power transmission towers, including poles, are considered real property for sales tax purposes. Services to attach personal property, such as wire and fiber optic cable, to real property are nontaxable transactions, whether or not the wire and fiber optic cable become part of the real property. Accordingly, the installation services performed by COMPANY, as described above, are not subject to sales tax in Utah.

Maintenance services. You also state that COMPANY performs maintenance on existing systems. For purposes of this opinion, we assume these existing systems are wires and fiber optic cables already attached to poles owned by telephone and power companies. In Utah, Aservices for repairs or renovations of tangible personal property@ are taxable transactions. Utah Code Ann. '59-12-103(1)(g). Accordingly, if the wires or fiber optic cables that are attached to the poles are considered personal property after their attachment, COMPANYS maintenance services would be taxable. However, the Commission generally considers wires and cables attached to telephone and power transmission poles to have become part of the realty. Based on that understanding and without facts indicating otherwise, we would consider these systems to be real property. Accordingly, COMPANYS maintenance services on these systems would not be taxable.

If you have any other questions, please contact us.

For the Commission,

Marc B. Johnson

Commissioner

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