Can a film production company buy or rent equipment, props, and construction materials tax-free in Utah, the way some other states offer a film-production tax rebate?

Plain-English summary

A production company filming a television movie in Utah asked whether it could get sales-tax-exempt status for its Utah purchases and rentals, pointing to other states' "tax-rebate" programs that refund sales tax on items "seen on screen" during a production.

The Commission's short answer: Utah has no such program, and creating one would take legislative action, not an administrative ruling. But it walked through what limited exemptions do apply under existing law:

• Sales BY a production company: Utah exempts sales of finished commercials, motion picture films, prerecorded audio tapes, or prerecorded video tapes — but only when a producer, distributor, or studio sells them to a motion picture exhibitor, distributor, or commercial television/radio broadcaster. Any other sale of tangible personal property by the company is taxable.
• Sales TO a production company — the resale exemption: A company can buy items tax-free under the resale exemption only if the item physically becomes part of the final film sold to the customer, or if title to the item itself passes to the customer (e.g., a videotape that's produced, used to make the film, and then actually sold to the customer). It must issue the vendor a resale exemption certificate to do this.
• Sales TO a production company — everything else: Items the company uses or consumes in filmmaking, or to which it retains title, are taxable — a purchased camera or prop, for example, or a master tape it keeps and duplicates rather than sells. Rentals of tangible personal property used in filmmaking are taxable too, even if the rented item physically appears on screen — renting equipment counts as "consuming" it.
• Construction charges: Taxability turns on whether labor is installing personal property to real property (nontaxable, under Rule R865-19S-78(B)) or installing personal property to other personal property (taxable, under the same rule's subsection (A)). Because film sets are often temporary, non-permanent structures, much of that construction is likely taxable installation-to-personal-property.

What this means for you

Film and TV production companies filming in Utah

Don't assume "seen on screen" purchases or a production-company tax exemption exists in Utah — it doesn't, unlike some other states. Budget sales tax into your Utah below-the-line costs for cameras, props, equipment rentals, and most construction, and use the resale exemption certificate only for the narrow category of items you actually sell onward to your customer (e.g., film stock/tapes that become part of a deliverable actually purchased by the customer).

Vendors renting equipment to production companies

Rentals of your tangible personal property to a production company are taxable transactions regardless of whether the rented item appears on screen — you should be charging and collecting sales tax on those rental charges.

Accountants and tax professionals

The key statutory hook is the narrow § 59-12-104(6) exemption (finished film/tape sales to specific buyer categories) versus the general resale exemption in § 59-12-104(27), which requires either physical incorporation into the resold product or actual passage of title to the customer — mere use in production isn't enough. Watch Rule R865-19S-78's real-property/personal-property line for construction and set-build charges.

Common questions

Q: Does Utah offer a sales tax rebate for film productions like some other states?
A: No. Utah has no such program; enacting one would require the Legislature to act.

Q: Can a production company buy props and cameras tax-free?
A: No, unless the item physically becomes part of the finished film that is actually sold to the customer, or title to it passes to the customer. Items the company consumes or keeps are taxable.

Q: Is renting equipment that appears on screen tax-free?
A: No. All rentals of tangible personal property used in filmmaking are taxable, even if the rented item appears in the finished film.

Q: Are set-construction charges taxable?
A: It depends on whether the labor installs personal property to real property (nontaxable) or to other personal property (taxable) — film sets, being temporary, often fall on the taxable side.

Citations and references

Statutes:

• Utah Code Ann. § 59-12-104(6) (exemption for sales of finished commercials/motion picture films/tapes to a producer, distributor, exhibitor, or broadcaster)
• Utah Code Ann. § 59-12-104(27) (resale exemption)

Rules:

• Utah Admin. Rule R865-19S-78 (taxability of installation labor: real property vs. personal property)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/03-008.html

Original ruling text

REQUEST LETTER

03-008

NAME

ADDRESS

To: Pam Hendrickson

Re: Private Letter Ruling

Attached is a copy of a letter I received requesting a tax exempt status for a production company that is in town to film a television movie of the week. Many states are giving tax rebates on sales tax for production related purchases.

I appreciate your expediting the private letter ruling as the company is in pre-production now and will shoot in May and be wrapped no doubt by the end of June.

Let me know if you have any questions, or you may also contact NAME, the production accountant.

Thanks for your help.

NAME

ADDRESS

PHONE

FAX

Dear NAME:

As we discussed earlier today, I am inquiring into the possible sales tax
exempt status for COMPANY. As you know,
we are a film production company and all items we purchase for the screen would
be considered a "re-sale" item. This
would include film stock, set dressing, props, construction and any other
product that is "seen" on screen.

As we also discussed – Utah has so much to offer Production Companies. For Utah to stay competitive it will have to embrace the "tax-rebate" idea. Many states have a tax rebate in place and because of this have continued to be successful in bringing production companies into their state. With this joint effort we can continue to keep production revenues here in the USA vs. loosing revenues to Canada, New Zealand, etc.

COMPANY has just completed photography in STATE where we receive all of the sales taxes paid during our stay back as a rebate. Prior to this location we were in CITY, STATE. They had in place the sales exempt status for production companies. This status again is for products that are seen on screen. Since the completion of our project STATE has passed their Tax Rebate Refund Program.

There are many other States which have tax rebate programs. Due to this they will continue to be the leaders in receiving production revenues.

Please let me know if we are eligible to receive the sales tax exempt status. If so, then we will need the proper paperwork to forward to our vendors. Thank you for all your help. If you have any questions please call me at PHONE.

Best regards,

NAME

Cc: NAME

RESPONSE LETTER

May 5, 2003

NAME

ADDRESS

RE: Private Letter Ruling Request – Sales Tax Exemption for Production Companies

Dear NAME,

We have received your request for a private letter ruling concerning Utah's sales tax laws and any exemption that may apply to production companies. The letter you attached from COMPANY. ("COMPANY") also refers to a "tax-rebate" program in STATE where a production company is rebated the sales taxes it paid on its taxable purchases and rentals in that state. Such a program is not currently available in Utah and would require enactment by the Legislature. However, we will address your request with respect to existing tax policy and any exemptions that might apply.

Sales By A Production Company. Under current Utah law, the only exemption
that specifically relates to a film production company is found in Utah Code
Ann. §59-12-104(6), which exempts from taxation the "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[.]" Accordingly, if COMPANY
is a producer, a distributor, or a studio, it can sell these items tax-free
only if the sale is made to a motion picture exhibitor, distributor, or
commercial television or radio broadcaster."
NAME would need to charge and collect sales tax on any other sale of
non-exempt tangible personal property.

Sales
To A Production Company. As to
COMPANY leases and purchases of tangible personal property while making a film,
there is no specific Utah exemption from taxation similar to that in STATE,
which applies to items "seen" on screen.
Again, such an exemption would require legislative action to amend
current law.

However, STATE may be able to purchase certain items used to make a film tax-free under Utah's resale exemption. UCA §59-12-104(27). An item qualifies for exemption if it is resold to a customer or if it becomes a necessary and component part of the final taxable product. COMPANY may purchase tax-free all items that physically become part of the film and items to which title passes to COMPANY customers. For example, if COMPANY purchases a video tape, uses the tape to produce a film, and sells that tape to its customer, it may purchase that tape tax-free. To purchase items that qualify for this exemption tax-free, COMPANY must issue the vendor an exemption certificate.

On the other hand, COMPANY must pay sales tax on all purchases of personal tangible property that it uses or consumes in the filmmaking process or to which it retains title. For instance, if COMPANY purchases a camera or prop, it must pay tax on that purchase. Also, if COMPANY purchases video tape to make a master tape, then reproduces the master and sells the copies, it must pay sales tax on the purchase of the video tape used as a master because this tape is not resold. COMPANY is also responsible for sales tax on its rental of tangible personal property for use in the filmmaking process, even if the rented items appear on screen. COMPANY is considered to have consumed all rentals of tangible personal property used in producing a film and, accordingly, is subject to taxation on the transactions.

Whether or not sales tax is applied to charges for "construction" depends on whether the construction occurs on real or tangible personal property. Under Utah Admin. Rule R865-19S-78(A) ("Rule 78"), amounts paid for labor to install tangible personal property in connection with other tangible personal property are subject to sales tax. As the filmmaking process often involves temporary and non-permanent structures, it is conceivable that much of the construction involved in this process is performed on tangible personal property and, therefore, is taxable. Nevertheless, under subsection (B) of Rule 78, charges for labor to install tangible personal property to real property are not subject to taxation, regardless of whether the personal property becomes part of the real property.

Should you have any other questions, please contact us.

For the Commission,

Marc B. Johnson

Commissioner

MBJ/KC

03-008

Cc: NAME

ADDRESS