Were Utah-origin round-trip bus charters crossing state lines taxable, and how was tax handled when the tour company hired another bus operator?

Plain-English summary

Utah Private Letter Ruling 95-007 said round-trip bus charters carrying passengers from Utah across state lines were exempt interstate transportation.

Trips that did not cross a state boundary were subject to Utah's intrastate-trip tax guidance.

When the tour operator collected ticket money and hired a separate bus company to perform the trip, the operator collected any applicable passenger tax and used a resale-exemption certificate with the hired carrier.

Charter activity

The requester operated tours from Utah to destinations outside the state.

It did not conduct tours solely within Utah and asked whether border or nearby out-of-state destinations should still count as interstate transportation.

It also sometimes hired buses from other companies during busy periods while selling the passenger tickets itself.

Interstate charters were exempt

Utah Code section 59-12-103 imposed tax on common-carrier transportation charges.

Utah Code section 59-12-104 included exemptions for specified transportation and for transactions Utah could not tax under the U.S. Constitution or federal law.

The Commission treated transportation of passengers across state boundary lines as interstate transportation.

The listed Utah-origin round trips to out-of-state destinations were therefore exempt from Utah sales tax.

Rule R865-19S-44 did not control

The requester cited Utah Admin. Rule R865-19S-44.

The Commission said that rule addressed sales of tangible personal property in interstate commerce, not charges for transporting people.

The passenger-transportation conclusion came from the interstate nature of the trip rather than that tangible-property rule.

Pending federal case

The response said a U.S. Supreme Court case was then pending on whether a state could tax the purchase price of tickets for interstate bus transportation.

The Commission warned that the outcome could change its answer.

It said any change would apply prospectively after transportation providers received notice.

The official file does not identify the case or state its eventual effect.

Intrastate trips and ticket collection

Utah Tax Bulletin 22-94 supplied guidance for trips that did not cross state boundaries.

If the tour company collected the ticket money from passengers, it also had to collect the applicable tax.

Hired buses and resale certificate

The tour company sometimes hired another bus company to satisfy its passenger-ticket obligations.

For a taxable trip, the tour company collected tax from the passengers.

It could give the hired bus company a resale-exemption certificate so that the hired carrier would not collect tax again from the tour company.

That prevented two layers of tax on the same transportation sold through the tour operator.

Holding

Under the ruling:

• Passenger trips crossing a state line were exempt interstate transportation.
• The cited tangible-property interstate rule did not govern passenger charges.
• Trips staying within Utah followed intrastate tax guidance.
• The party collecting passenger ticket money collected the applicable tax.
• A tour operator hiring another bus company could issue a resale-exemption certificate.
• A pending Supreme Court case could have changed the interstate result prospectively.

What this means for you

Charter-bus companies and tour operators

Classify each route and contract. Crossing a state boundary was decisive under this historical ruling.

Companies hiring substitute carriers

Document which party sells the passenger transportation and use proper resale documentation to avoid duplicate collection.

Accountants and tax professionals

Verify current Utah law and federal limits. This 1995 ruling expressly warned that federal case law could change its conclusion.

Common questions

Q: Were Utah-origin tours to out-of-state destinations taxable?

A: No, under the ruling.

Q: Did it matter how far the bus traveled into the other state?

A: The Commission treated crossing the state boundary as interstate transportation.

Q: Were trips entirely inside Utah taxable?

A: They were governed by Utah's intrastate-trip tax guidance.

Q: Who collected tax when the tour company sold the tickets?

A: The tour company collected the applicable passenger tax.

Q: Did the hired bus company also tax the tour operator?

A: Not when the tour operator provided a resale-exemption certificate.

Q: Was the interstate answer guaranteed to remain unchanged?

A: No. The response identified a pending Supreme Court case that could change the answer prospectively.

Key source language

• Interstate result: “Charges for transportation of persons across state boundary lines are considered as charges for interstate transportation and are considered as exempt from the Utah sales or use tax”
• Scope of Rule 44: “Rule R865-19S-44 covers exemption from sales of tangible personal property in interstate commerce, not charges for transportation of persons.”
• Ticket seller: “If you collect the money for the tickets from your passengers, then you must also collect the tax.”
• Hired carrier: “you should provide a resales exemption certificate to the other bus company so they will not collect tax from you.”

Citations and references

• Utah Code Ann. § 59-12-103
• Utah Code Ann. § 59-12-104
• Utah Admin. Rule R865-19S-44
• Utah Tax Bulletin 22-94

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 95-007
• Date note: the formal response letter is undated in the extracted text; the official HTML page labels the response February 24, 1995.
• Federal-case note: the official file mentions a pending U.S. Supreme Court case but does not identify it.
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

95-007

Response February 24, 1995

Request

June
28, 1994

Utah
State Tax Commission

210
North 1950 West

Salt
Lake City, Utah 84134

Dear
Sir:

I
am seeking an advisory opinion on the implementation of sales taxes on charter buses as it effects XXXXX. I understand the effective date of the State�s attempt to impose this tax is XXXXX.

Last
month I attended a meeting held by the Tax Commission staff with most local charter bus companies. Although I was an uninvited guest, the staff advised the group that the sales tax issue does not effect interstate commerce, including transportation to XXXXX, XXXXX, XXXXX, XXXXX, XXXXX, XXXXX, XXXXX, XXXXX and XXXXX. We do not conduct any tours solely within the state of Utah.

It
was only yesterday that I heard a rumor that the Tax Commission was now attempting to collect sales tax on charter buses to XXXXX, even though these tours cross a state line and are considered interstate moves by every other government agency of which I am aware. Our buses are governed by the rules of the Interstate Commerce Commission rather than Utah�s Public Service Commission. Our passengers certainly spend a greater percentage of their time on each tour out of the state of Utah rather than as a passenger on a bus within Utah�s border. If the Tax Commission is intent on taxing tours to XXXXX, can you advise us just how far into XXXXX we must go before it becomes interstate commerce and nontaxable. How can the Tax Commission single out XXXXX, XXXXX. for this special treatment? It would seem that tours to XXXXX, XXXXX, XXXXX, XXXXX, and similar border destinations should be treated equally. How can the Tax Commission single out charter buses, ignoring similar issues with trains, airlines, and trucks? Does the Commission�s ruling conflict with section R865-19-44S of the Utah Administration Code? It appears from my reading of this section that we comply with all criteria in order to qualify as interstate commerce.

XXXXX frequently hires buses from other companies
to transport passengers to XXXXX to help with our busy periods. These companies, I assume under your proposal, are obligated to collect taxes from us for these interstate moves. I assume the state also wishes us to pay sales tax on the tickets we sell to each passenger on these buses. Frequently a XXXXX bus will be parked next to a bus hired from another company, loading a two bus move. In this case, will I be paying sales tax on just the ticket price for the passengers on our bus, but paying both sales tax on the ticket price paid by passengers in the hired bus plus the sales tax charged by the hired bus company even though the passengers on both buses should pay the same fare for the same trip? Since I understand that I am required to pass these taxes along to the consumer rather than absorb the cost, should I collect just the sales tax on the fare from the passengers boarding our bus, but both the sales tax on the fare and the sales tax on the taxes charged by the hired bus company on passengers boarding their bus. I would appreciate some guidance on this issue.

It
is clear that there are many issues regarding the sales taxes on XXXXX, XXXXX buses that require further legal investigation. It is not possible for us to change our newspaper ad and brochures on such short notice. We have commitments to groups for tours at prices we have guaranteed. May I suggest that a more reasonable course of action would be to delay implementation of sales taxes on XXXXX, XXXXX buses until the �Transportation Summit� mentioned by Mr. Val Oveson in a conversation held XXXXX. On behalf of our passengers, the majority of which are senior citizens, the least likely group able to absorb additional taxes, I await your advisory opinion on the issues noted above.

Sincerely,

XXXXX

MEMORANDUM

TO: ALICE SHEARER, Commissioner

FROM:
XXXXX, Executive Director

DATE: February 22, 1995

RE: Advisory Opinion for XXXXX

Auditing
Division has prepared an advisory opinion for XXXXX. I have reviewed this opinion an am forwarding it to you for your review and signature.

Thank
you!

February 24, 1995

Re: Advisory Opinion - Utah Sales Tax
Application to Bus Charters to Various XXXXX Locations

Dear
XXXXX:

You
requested an advisory opinion as to whether the Utah sales tax applies to charges for bus charters involving round trips to various XXXXX locations.

Our
research indicated as follows:

1. Utah Code Annotated Section 59-12-103
   imposes the tax on charges by common carriers for �all transportation.� U.C.A. Section 59-12-104 exempts �intrastate movements of freight by common carriers.� U.C.A. Section 59-12-104 also exempts transaction� ...which the state is prohibited from taxing under the Constitution or laws of the United States....�

2. Charges for transportation of persons across
   state boundary lines are considered as charges for interstate transportation and are considered as exempt from the Utah sales or use tax under interstate commerce theory. Consequently, your charges for bus charters involving round trips from Utah locations to XXXXX, XXXXX, XXXXX, XXXXX, XXXXX, XXXXX, XXXXX and XXXXX are exempt from the sales tax. Rule R865-19S-44 covers exemption from sales of tangible personal property in interstate commerce, not charges for transportation of persons.

3. There is currently a case before the U.S.
   Supreme Court on this same issue of whether a state may tax the purchase price of bus tickets for interstate transportation. The outcome of this case could change the answer given above. Any change would be prospective after the notice was given to transportation providers.

4. Tax Bulletin 22-94 (copy attached) provides
   guidance for trips not crossing state boundaries. If you collect the money for the tickets from your passengers, then you must also collect the tax. If, to fulfill your obligations from those tickets sales, you hire buses from another company, you should provide a resales exemption certificate to the other bus company so they will not collect tax from you.

This
opinion is based upon the facts presented in your letter. Obviously, if there are deviations from these facts, this opinion may be negated.

If
you do not agree with this determination, you may appeal to the Tax Commission for a formal hearing. The results of that hearing would constitute a declaratory judgment and be appealable to the Utah State Supreme Court. A Notice of Appeal Rights and a copy of the Utah Taxpayer Bill of Rights are attached.

Respectfully,

Alice
Shearer

Commissioner