Were tolls charged for access to a privately operated Utah toll road subject to sales tax as transportation charges or admission and user fees?

Plain-English summary

Utah Private Letter Ruling 01-002 said charges for access to a private toll road were not subject to Utah sales tax.

The Commission analyzed the two taxable-service categories that might have applied: payments to common carriers for transportation and admission or user fees.

Neither applied. The toll-road company did not transport anyone or anything for hire, and the road was not a listed admission venue or an amusement, entertainment, recreation, exhibition, cultural, or athletic activity.

The proposed toll road

A Utah corporation held county franchises to build and operate a private toll road approximately one-half mile long, including a bridge.

Drivers would pay cash at a toll booth or use a prepaid account charged electronically as the vehicle passed through the collection facilities.

The company asked whether the toll was taxable under Utah's Sales and Use Tax Act.

Sales tax covered specified property and services

The Commission said Utah sales tax applied only to sales of tangible personal property and specifically defined taxable services.

A toll road was real property, not personal property.

The access charge therefore could be taxed only if it fell within one of the listed taxable-service categories.

Not common-carrier transportation

Utah Code Ann. § 59-12-103(1)(b) taxed amounts paid to common carriers for transportation.

The cited definition described a common carrier as a person engaged in transporting passengers, freight, merchandise, or other property for hire in Utah.

The toll-road company did not transport customers or their property. It charged for access to improved real property, which customers used with their own means of transportation.

The common-carrier provision did not apply.

Not a taxable admission or user fee

Utah Code Ann. § 59-12-103(1)(f) taxed admission or user fees to specified venues and other amusement, entertainment, recreation, exhibition, cultural, or athletic activities.

A toll road was not one of the listed venues.

The Commission also concluded that the general activity categories were not broad enough to include toll-road access.

Holding

The Commission held that:

• The toll road was real property.
• The operator sold access, not transportation for hire.
• The operator was not a common carrier for this transaction.
• The toll was not a taxable admission or user fee.
• The access charge was not subject to Utah sales tax.

What this means for you

Toll-road and infrastructure operators

The ruling distinguished access to a road from providing transportation. Confirm whether a modern arrangement includes other services or charges beyond road access.

Transportation businesses

Owning or operating transportation infrastructure does not necessarily make the operator a common carrier. The ruling focused on who actually moved passengers or property.

Accountants and tax professionals

Classify the transaction before applying a tax rate. The property involved, service performed, and statutory category drove the result.

Common questions

Q: Was the private toll taxable?

A: No. The Commission held the access charge outside the listed taxable services.

Q: Was the toll-road operator a common carrier?

A: No. It did not transport passengers or property for hire.

Q: What did customers buy?

A: Access to improved real property that they used with their own transportation.

Q: Was the toll a taxable admission or user fee?

A: No. A toll road was not a listed venue or one of the general taxable activity categories.

Key source language

• Nature of charge: “COMPANY charges a fee for access to improved real property which its customers can use if they have their own means of transportation.”
• Common-carrier result: “Because COMPANY does not provide transportation for hire, Section 59-12-103(1)(b) is inapplicable.”
• Holding: “the toll road charge to access the COMPANY is not subject to Utah sales tax.”

Citations and references

• Utah Code Ann. § 59-12-102(6)(a)
• Utah Code Ann. § 59-12-103(1)(b) and (f)
• Utah Code Ann. § 17-50-308 (identified in the request as formerly § 17-5-235)

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 01-002
• Date note: the source header identifies the response as January 31, 2001; the response letter is dated January 30, 2001.
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

REQUEST
LETTER

01-002

Response 1/31/01

January 9, 2001

Dear Members of the State Tax
Commission:

By
this letter Company., a Utah corporation, seeks a formal advisory opinion as to whether, under the Sales and Use Tax Act, a tax is levied on tolls or charges paid to the owner for the right to travel on a toll road.

Since
legislation on this question may be filed with the Utah Legislature for consideration during the 2001 Legislature Session, an expedited advisory opinion would be much appreciated.

Following
are facts which may be relevant to your rendering an advisory opinion. If additional facts are needed please call NAME, (PHONE) or our attorney NAME at PHONE .

COMPANY
obtained a franchise from County pursuant to Section 17-5-235 (now 17-50-308), Utah Code Annotated, 1953, as amended, by Ordinance Granting Franchise, dated DATE. A similar franchise was obtained from County by Ordinance Granting Franchise, dated December 6, 1995.

These
franchises authorize the construction and operation of a private toll road from the southern terminus of ADDRESS in CITY to the COUNTY Interchange of Interstate Highway ## in CITY. The toll road is approximately one-half mile long and includes a bridge across the RIVER. Since RIVER, at that point, forms the boundary between COUNTY and COUNTY, the toll road is located in both COUNTY and Counties. However, most of the toll road, including the toll collection booth and administrative facilities are located in County.

Tolls
will be paid either in cash at the toll booth or by establishing a prepaid account through the administrative office. If paid through a prepaid account, the account will be charged electronically when the vehicle passes through the collection facilities. The amount of the toll has yet to be determined, but will likely be between $$$$$ and $$$$$ per vehicle. However, there will be some variations in the toll for the extra axles and/or weight of trucks and larger vehicles.

COMPANY
is obligated under the franchise agreement with COUNTY to pay a percentage of the gross of all tolls collected to County as consideration for the grant of franchise.

The
toll road is currently under construction.
It is anticipated that the road will be open for travel by the general public on or about DATE.

Request
is hereby made that the State Tax Commission issue a formal advisory opinion as the applicability of the Sales and Use Tax Act and specifically Section 59-12-103, Utah Code Annotated, 1953, as amended. Stated differently, is a sales or use tax levied on tolls paid for use of the service provided by a private toll road facility?

Your
expedited consideration of this request would be appreciated.

Sincerely,

NAME

DBS/ejb

RESPONSE
LETTER

January
30, 2001

Dear NAME

The Tax
Commission has received your request for a written advisory opinion regarding the application of sales tax to users� charges for the COMPANY. As we understand the facts presented, the COMPANY is a toll road. A toll will be charged to each user who accesses the toll road. The charge may be paid in cash or by electronic means.

The
Utah sales tax is imposed only on sales of tangible personal property or specific defined services. As a toll road is clearly real, not personal property, the sale of access to the toll road will only be taxable if it falls within the definition of one of the specific taxable services listed in Utah Code Ann. '59-12-103. Of those services listed, only the two discussed below can arguably include access to a toll road.

Amounts
Paid to Common Carriers for Transportation. Section 59-12-103(1)(b) imposes a sales tax on the amounts paid to common carriers for transportation. A Common carrier (a) is defined in Utah Code Ann. '59-12-102(6)(a) to mean a person engaged in or transacting the business of transporting passengers, freight, merchandise, or other property for hire within this state. COMPANY. does not transport passengers, freight, merchandise, or other property for hire. Instead, COMPANY charges a fee for access to improved real property which its customers can use if they have their own means of transportation. Because COMPANY does not provide transportation for hire, Section 59-12-103(1)(b) is inapplicable.

Admission
or User Fees. Section 59-12-103(1)(f) imposes a sales tax
on admissions or users fees to various specifically listed venues and any other amusement, entertainment, recreation, exhibition, cultural, or athletic activity. A toll road is not one of the listed venues, and we do not believe the general language just cited is broad enough to include such a road. Accordingly, Section 59-12-103(1)(f) is also inapplicable.

For
these reasons, we hold that the toll road charge to access the COMPANY is not subject to Utah sales tax. Please let us know if you have other questions.

For
the Commission,

Marc
B. Johnson

Commissioner

MBJ/IR

01-002