Did Utah sales tax apply to videotaping legal depositions and court proceedings, trial-presentation services, and related canned software?

Plain-English summary

Utah Private Letter Ruling 02-031 said videotaping legal depositions and other legal proceedings was subject to sales tax.

The Commission treated the video recording as the primary object of the transaction. It did not treat the tape as merely incidental to a nontaxable professional service.

The response distinguished legal videography from a court reporter's transcription service. Utah had historically not taxed transcription services, but the Commission declined to extend that treatment to videotaping.

Other litigation-support work received a different preliminary answer. Helping an attorney prepare a case with trial software or present a case in court was likely a nontaxable service, but any sale or lease of canned software required more facts.

Services described

The requester provided three kinds of litigation support:

• Videotaping depositions for attorneys and courts.
• Helping attorneys build cases using trial software.
• Going into court to help attorneys present those cases.

The requester argued that deposition transcripts were not taxed and asked why a video record of the same proceeding should be treated differently.

Trial preparation and courtroom presentation

The Commission said helping an attorney prepare a case or present it in the courtroom was likely a sale of nontaxable services.

That answer was qualified. If the provider sold or leased canned computer software while performing those services, the Commission would need more information before determining the tax liability.

The official source prints the cited software rule as Utah Admin. Rule R985-19S-92(A)(1).

Legal videotaping was taxable

The Commission focused on the transaction's primary object.

Utah generally taxed sales of tangible personal property while most services were not taxable. A video transaction could be nontaxable if the tape were only incidental to a service, but the Commission compared legal videography to wedding-video production and found the recording itself was what the customer primarily purchased.

It therefore treated the sale of videotaping services, including the videotaping of legal proceedings, as taxable.

No specific videotape exemption applied

The response cited Utah Code section 59-12-104(6), which exempted certain prerecorded tapes sold by a producer, distributor, or studio to specified motion-picture or broadcasting businesses.

An attorney client did not qualify as a motion-picture exhibitor, distributor, or commercial television or radio broadcaster.

The specific exemption therefore did not cover prerecorded legal-proceeding videos sold to attorneys.

Client-supplied blank tapes

The Commission noted that its earlier Advisory Opinion 96-154DJ had found videotaping services taxable even when the client supplied the blank tape.

Supplying the physical recording medium did not change the Commission's classification of the videography transaction.

Why transcription was different

The requester compared a deposition video to a court reporter's transcript.

The Commission acknowledged that transcription services had historically not been taxed in Utah. It said there might be an argument for taxing them, but it considered it inappropriate to reverse the longstanding nontaxable treatment.

It also declined to expand that treatment to video. In the Commission's view, the difference between transcribing and videotaping court proceedings justified different tax treatment.

Holding

Under the described facts:

• Videotaping legal depositions and other court proceedings was taxable.
• The video was the transaction's primary object rather than an incidental product.
• The result did not change when the client supplied the blank tape.
• Helping attorneys prepare or present cases was likely nontaxable.
• Selling or leasing canned software during those services required more information.
• Historically nontaxable transcription treatment did not extend to legal videography.

What this means for you

Legal videographers

Do not assume professional skill or use in litigation turns a video recording into a nontaxable service. The Commission focused on what the customer primarily received.

Litigation-support companies

Separate case-strategy and courtroom-presentation services from video products and software. Different components can receive different tax treatment.

Court reporters and attorneys

The ruling treated transcripts and videos differently even when both documented the same deposition.

Accountants and tax professionals

Review the transaction's true object, the delivered product, software rights, and customer-supplied materials under current law.

Common questions

Q: Was videotaping a legal deposition taxable?

A: Yes. The Commission treated the recording as the primary object of a taxable transaction.

Q: Did the legal purpose of the video make it exempt?

A: No. The specific videotape exemption did not cover sales to attorney clients.

Q: What if the client supplied the blank tape?

A: The Commission said prior guidance still treated the videotaping service as taxable.

Q: Were trial-preparation and courtroom-presentation services taxable?

A: The response said they were likely nontaxable services on the stated facts.

Q: What if the provider also sold or leased canned software?

A: The Commission needed more information before deciding the software-related tax liability.

Q: Why were court-reporter transcripts treated differently?

A: Utah had historically not taxed transcription services, and the Commission declined both to reverse that treatment and to extend it to videotaping.

Key source language

• Primary object: “the primary object of such transactions is the video tape itself, not the services.”
• Tax result: “the sale of videotaping services, including videotaping legal proceedings, is considered a taxable sale.”
• Client-supplied tape: “videotaping services are taxable even if your client supplies a blank tape for you to use.”
• Final conclusion: “your services to videotape court proceedings are subject to sales tax under Utah law.”

Citations and references

• Utah Code Ann. § 59-12-103(1)
• Utah Code Ann. § 59-12-104(6)
• Utah Admin. Rule R985-19S-92(A)(1), as printed in the official source
• USTC Advisory Opinion 96-154DJ (October 1, 1996)

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 02-031
• Source-text note: the official source prints the cited canned-software rule as “R985-19S-92(A)(1).”
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

REQUEST LETTER

02-031

NAME

ADDRESS

PHONE

Request for Advisory Opinion

I am requesting your opinion on a matter of "Legal Video Service." I formally worked out of state in the legal video field. Our services were tax exempt. I am requesting this information from you on the service that I give to attorneys and courts in this field. I video tape legal depositions for court cases with attorneys and a court reporter. The Attorney takes the video and will use it in building his case. I also build cases with them using trial software and then go into the courtroom with them to present the case we have built.

What I am wondering is if your video laws pertaining to weddings, etc. are imposed on my legal business also? Or, is it taxed exempt? A court reporters transcript is not taxed in depositions, so why would the video? Also, for whatever reason when I received my business license, no one had come across this situation on the tax issue. Even though I know there are other places like myself in Salt Lake and some court reporting firms have "in house" videographers. No one can really tell me if they are having to charge sales tax themselves.

The downside is that the legal cost of litigation will surely rise. If you will please arrange a meeting where I could come and meet with you to discuss this matter I would greatly appreciate it. There is a lot more to this than what can be put on a paper in a appropriate amount of time. Please, respond as soon as possible. Feel free to call me with the number provided.

NAME

PHONE

RESPONSE LETTER

February 19, 2003

NAME

ADDRESS

RE: Private Letter Ruling Taxation of Legal Video Services

Dear NAME,

We have received your request for a private letter ruling concerning the taxation of your legal video services. These services consist of videotaping legal depositions, helping attorneys prepare their cases using trial software, and helping attorneys present their cases in the courtroom.

Sales of most services are not taxable under Utah law, while sales of most items of tangible personal property are taxable. Utah Code Ann. �59-12-103(1). When you sell your services to help an attorney present a case in the courtroom or prepare the case beforehand, it is likely that these transactions are sales of nontaxable services. However, should you sell or lease canned computer software, as defined in Utah Admin. Rule R985-19S-92(A)(1), in the performance of these services, then more information would be needed before your tax liability can be determined.

It appears, however, that your primary concern in requesting this ruling is the taxation of videotaping legal depositions and other legal proceedings. You state that such sales were exempt from taxation in other states. Of course, Utah law may be different from the law found in other states. The only exemption in Utah law that relates specifically to video tapes is found in Utah Code Ann. �59-12-104(6), which provides that �sales of commercials, motion picture films, prerecorded audio program tapes or records, and prerecorded video tapes by a producer, distributor, or studio to a motion picture exhibitor, distributor, or commercial television or radio broadcaster� are exempt. (Emphasis added). As an attorney client would not be considered a �motion picture exhibitor, distributor, or commercial television or radio broadcaster,� sales of prerecorded video tapes to an attorney would not be exempt.

Regardless of the lack of a specific exemption, were the Commission to consider the video tape to be incidental to the sale of nontaxable videotaping services, then the entire transaction would be nontaxable. However, under similar circumstances, such as producing wedding videos, the Commission has found that the primary object of such transactions is the video tape itself, not the services. Accordingly, the sale of videotaping services, including videotaping legal proceedings, is considered a taxable sale. We also note that the Commission has previously found in USTC Advisory Opinion 96-154DJ (October 1, 1996) that videotaping services are taxable even if your client supplies a blank tape for you to use.

You also compare the videotaping of legal proceedings to the transcription services provided by a court reporter. Because transcription services have not been historically taxed in Utah, you believe the videotaping of legal proceedings should also be deemed nontaxable services. However, although there may be some argument to support the taxation of transcription services, the Commission feels it is inappropriate to reverse the current and long-standing treatment not to tax these services. Nor would we consider it reasonable to extend such nontaxable treatment to videotaping services. The Commission believes the distinction between videotaping of court proceedings, as opposed to transcription services, is sufficient, for the reasons stated above, to warrant different tax treatment for the two. Accordingly, we find that your services to videotape court proceedings are subject to sales tax under Utah law.

Please contact us if you have any further questions.

For the Commission,

Marc B. Johnson

Commissioner

MBJ/KC

02-031