Which office facilities-management functions — copying, mailroom, courier, data entry, reception, and more — are taxable under Utah sales tax?

Plain-English summary

An accounting/consulting firm asked the Commission to sort through the sales tax treatment of a typical office "facilities management" (FM) contract, where one company (A) runs another company's (B's) on-site office support functions — copying, mailroom, fax, supply management, forms/printing, courier, data entry, and reception — usually billed as a base monthly fee plus per-use overages. The Commission answered function-by-function:

Taxable:

• Copy center services — the entire charge is taxable (Rule R865-19S-80).
• "Convenience copiers" provided without an operator for the client's own staff to use — treated as a taxable equipment rental charge.
• Forms and printing services — taxable, same as copy center work.
• Any equipment (mailroom machines, copiers, etc.) sold or rented to the client — a taxable sale/rental of tangible personal property.
• Inventory-control software sold or leased to the client (as opposed to used in-house by the vendor's own staff) — taxable under the canned-software rule (Rule R865-19S-92), unless it's genuinely custom-built for that one customer.

Not taxable:

• Mailroom services (processing outgoing mail, delivering incoming/interoffice mail) — though selling or renting the mailroom equipment itself is separately taxable.
• Facsimile services.
• Office supply management services, when performed by the vendor's own employees using the vendor's own software (not sold/leased to the client).
• Courier services alone. But delivery charges tied to a taxable sale or lease are part of the taxable price, even if separately stated — e.g., delivering copy-machine supplies along with a taxable sale of those supplies.
• Data entry — a nontaxable personal service.
• Office reception (an on-site receptionist) — a nontaxable personal service.
• Personnel placement fees — not taxable, when the client hires away a worker the vendor had assigned to their site.

Bundling rule: if a single invoice charge mixes taxable and nontaxable items, the whole charge is taxable unless the nontaxable items are separately itemized on the bill.

Registration: a vendor making any of the taxable sales/services above must obtain a Utah sales tax license, listing each business location if there's more than one.

Exempt customers: the State of Utah and its political subdivisions, and the federal government, can buy tax-free as a rule; religious and charitable organizations qualify too, but only once they've obtained their own exemption number from the Commission. (The taxpayer's separate question about whether the client can give the vendor a resale certificate when re-billing the FM charge to its own customers isn't directly answered in the available response text.)

Manufacturing exemption for equipment: some printing operations may qualify to buy printing equipment tax-free under the manufacturing exemption, but photocopying centers specifically do not qualify as manufacturing operations, and mailroom equipment doesn't qualify either. Equipment bought specifically to resell or lease to a client, however, can be purchased tax-free under the resale exemption — with sales tax then collected from the client on the resale/rental price.

Supplies and repair parts: supplies (paper, toner, developer, fuser oil) used to maintain the vendor's own equipment are generally treated as consumed by the vendor and thus taxable to the vendor — unless the vendor is genuinely in the business of selling copying/printing services and the supply becomes a component of the finished product being resold (e.g., toner that physically becomes part of copies sold to the client can be bought tax-free as a resale-ingredient). That exemption doesn't extend to a client buying its own office supplies for internal use. If the vendor sells or rents copiers to the client and separately charges for repair, the labor for that repair is taxable, and if parts/supplies (like toner kits) are bundled into the repair charge, the entire charge becomes taxable.

Subcontracting: if the vendor outsources overflow work to another company, it can give that subcontractor a resale exemption certificate for items purchased for resale; but if the subcontractor bills the end client directly instead, the subcontractor itself must collect tax on any taxable transactions.

What this means for you

Facilities-management and business-process-outsourcing companies

Map each service line in your FM contract against this taxable/nontaxable breakdown before you invoice — copying, printing, and equipment rentals are taxable; mailroom, fax, courier-alone, data entry, and reception are not. Separately itemize nontaxable services from taxable ones on every invoice, since bundling drags the whole charge into the tax base, and remember delivery charges tied to a taxable item ride along as taxable even when stated separately.

Copy/print shops and similar consumable-heavy businesses

You can buy toner and similar consumables tax-free under the resale-ingredient theory only if you're actually selling the copies/prints those supplies go into — buying the same supplies for your own internal office use doesn't qualify, and neither does a client buying its own supplies for its own convenience copiers.

Accountants and tax professionals

This ruling is a good one-stop reference for a wide range of common outsourced-office-services categories; note the source text cites the underlying imposition statutes as "§§ 59-2-102 and 103," almost certainly a typo for Title 59 Chapter 12 (the actual Sales and Use Tax Act) — verify the correct current citation before relying on it.

Common questions

Q: Is a copy center service taxable in Utah?
A: Yes — the entire charge for copy center services is taxable.

Q: Is mailroom service taxable?
A: No, the service itself isn't — but selling or renting the mailroom equipment is a separate taxable transaction.

Q: Are data entry and reception services taxable?
A: No — both are treated as nontaxable personal services.

Q: Can a copy/print business buy toner tax-free?
A: Only if it's genuinely reselling copies/prints and the toner becomes part of what's sold — not if it's just consuming supplies for its own operations or a client's internal use.

Q: Can I rely on this 1996 ruling today?
A: Not directly — it binds the Commission only for the taxpayer and facts it addressed, and Utah's rules have been renumbered and amended repeatedly since. Verify current law before relying on it.

Citations and references

Statutes:

• Utah Code Ann. §§ 59-12-102 and 59-12-103 (imposition of Utah sales and use tax — cited in the source as "§§ 59-2-102 and 103")

Rules:

• Utah Admin. Rule R865-19S-80 (copy center services)
• Utah Admin. Rule R865-19S-92 (canned vs. custom computer software)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/96-159.htm

Original ruling text

96-159

Response October 28, 1996

Request

September 27, 1996

Utah State Tax Commission

Ms.XXXXX

Director, Auditing Division

210 North 1950 West

Salt Lake City, UT 84134

Dear Ms.XXXXX:

Our firm has been engaged to determine the correct
sales and use tax application of certain issues that affect the office support
services industry. Below is a fact pattern followed by specific questions.
Where possible, I would like your responses to reference the appropriate
citation (law, rules, regulations, cases, or policy). I appreciate your
cooperation with this inquiry.

FACTS

Many companies have begun to outsource certain office
support functions to increase productiv ity and decrease administrative
burdens. These operations are referred to as facilities manage ment, or FM's.
In a typical fact pattern, Company A provides the equipment, personnel,
supplies, maintenance, and management necessary to run Company B's office
support services on site. Company A typically charges Company B a base monthly
fee plus an overage fee if specific requests exceed maximum amounts specified
in the contract (i.e., the base fee may include up to 100,000 copies, with each
additional copy charged an overage fee per copy). In some instances, each
function may be billed separately. Personnel overtime charges are routinely
itemized on the invoice. Listed below are the various functions included in a typical
FM contract:

a) Copy Center - This includes picking up the
items to be duplicated, duplicating a specified number of black and white,
color, or oversize copies, binding, stapling, collating, and delivering the
finished product to Company B personnel. In addition to a base monthly fee, a
per copy fee may be charged for overages.

b) Convenience Copiers (without operators) -
Copiers are provided by Company A so that Company B personnel can make their
own copies. Periodic maintenance checks, equipment, supplies, and repairs are
included.

c) Mailroom Services - Includes processing
all outgoing mail and delivering all incoming and interoffice mail throughout
the day to Company B personnel. Postage is reimbursed on an actual basis.

d) Facsimile Services - Facsimile services
include sending, receiving and delivering facsimiles to Company B personnel.

e) Office Supply Management Services -
Includes monitoring inventory levels, controlling distribution of supplies,
periodic inventory counts, recording all client billable and departmental usage
through a proprietary software package and stocking supplies purchased by
Company B.

f) Forms and Printing Service - Includes
updating and printing Company B's forms, personnel directories and other
materials.

g) Courier Services - Includes picking up and
delivering packages as requested by Company B personnel. Charges are tracked so
that they can be billed back to Company B's clients.

h) Data Entry - Includes keying information
into a computer system as requested by Company B personnel.

I) Office Reception - Company A will furnish
a receptionist on Company B's premises.

QUESTION 1 - REGISTRATION

Is an FM, providing one or all of the above, required
to be registered as a separate business location for sales and use tax
purposes?

QUESTION 2 - BILLING

Please comment on the application of sales and/or
use tax if one monthly charge is made for all of the above items. Does the
taxability change if costs for specific services are itemized in the contract
but invoiced on a lump sum basis with reference to the contract? If each item
were separately billed, which would be subject to sales tax?

QUESTION 3 - EXEMPT CUSTOMERS

Some of Customer A's customers may be exempt
entities in your state. If the FM charge is considered taxable in your state,
please provide a list of the types of organizations (i.e., govern mental,
religious, educational, charitable, etc.) that could provide a valid exemption
certificate. Can Company B provide Company A with a resale exemption
certificate if the charge for the FM is rebilled to Company B's customers?

QUESTION 4 - EQUIPMENT PURCHASES

Would any of the FM equipment (i.e., mailroom
equipment and copiers) purchased by Company A be eligible for an exemption from
sales tax as manufacturing or printing equipment?

If the equipment is shown separately on the invoice
as a lease or rental, with sales tax applied, can the equipment be purchased
under a resale exemption?

QUESTION 5 - SUPPLIES, MAINTENANCE AND REPAIR PARTS

Company A provides paper, toner, developer and fuser
oil (consumable supplies) in most FM contracts. Are these consumables subject
to use tax or are they purchased for resale, since the copies are sold? Is the
answer different if the charge from Company A to Company B is on a lump sum
basis or a cost per copy basis?

Company A provides all maintenance and repairs for
its equipment used in the FM. If the maintenance is separately stated, is the
total amount of the maintenance charge, including labor and materials, subject
to sales tax? Are the repair parts purchased tax free for resale or subject to
use tax?

QUESTION 6 - PERSONNEL ISSUES

Company A provides and supervises all personnel required
to perform FM services. Company B retains the right to request that a
particular employee be removed from their site. I have several questions
regarding the taxability of personnel charges:

a) Company B may hire a current employee of Company
A who has been assigned to their site. Company B is required to pay Company A a
placement fee. Is this placement fee taxable?

b)
Company A may outsource excess work to Company C. Can Company A give

Company
C a resale certificate?

Thank
you very much for your time and effort. If you have any questions, please feel
free to call me at XXXXX or my associate, XXXXX.

Sincerely,

XXXXX

XXXXX

Advisory Opinion - Taxation of office management
services

Dear XXXXX

We have
received your request for sales tax advice pertaining to services offered by
your company in Utah. We offer the
following guidance:

Sales
or leases of tangible personal property and charges for certain services are
taxable in Utah. Utah Code Ann. ��59-2-102
and 103. With regard to your specific
examples, the following are taxable:

1. Charges
   to your customers

a. The
entire amount charged to your customers for copy center services are
taxable. (See Utah Administrative Rule
R865-19S-80, enclosed).

b. Charges
to Company B for convenience copiers are regarded as rental charges and they
are taxable.

c. Mailroom
services are not taxable. If you sell
or rent mailroom equipment to Company B, the charges are considered taxable
sales or rental charges.

d. Facsimile
services are not taxable.

e. Office
supply management services are not taxable if the services are provided by your
employees using your software. However,
if you have developed or purchased inventory control software for sale or lease
to your customers, the sale or lease is taxable (unless you have designed
custom software for that particular customer).
For more information about taxation of software, see Utah Admin. Rule
R865-19S-92 (copy enclosed).

f. Forms
and printing services, like �a� above, are taxable.

g. Charges
for courier services alone are not taxable.
However, delivery charges associated with a taxable sale or lease are
considered part of the sales price, even if separately stated. Therefore, if Company A sells and delivers copy
machine supplies to Company B, any amount charged for delivery is part of the
taxable amount.

h. Data
entry is a non-taxable personal service.

i. Office
reception is a non-taxable personal service.

2.
Registration

If
your company is making taxable sales or providing taxable services in Utah as
described above, you must obtain a Utah sales tax license. You may use the enclosed form to apply for
the license. If you have more than one
place of business, indicate the locations on the application form. (If you need assistance preparing this form,
contact the Customer Service Division at (801) 297-7741.)

3. Billing

If
the charges to your customer include both taxable and non-taxable items, the entire
amount is subject to tax unless the non-taxable items are separately itemized
on the bill or invoice.

4. Exempt
   customers

As
a rule, the State of Utah and its political subdivisions (counties, cities,
towns, etc.) and the federal government may make purchases tax free. Religious and charitable organizations who
have obtained an exemption number from the Tax Commission are also eligible for
exemption.

5. Equipment
   purchases

Certain
printing operations are eligible to purchase printing equipment tax exempt
under the manufacturing exemption.
Photocopying centers are not considered manufacturing operations. We do not have enough information about the
type of copy center you are operating to determine whether your equipment
purchases are eligible for exemption.
Mailroom operations are not considered manufacturing, and, therefore,
equipment purchased for use in the mailroom is not exempt.

If
you purchase or lease copiers or other equipment for resale or lease to your
customers, you may purchase them tax free under the resale exemption. You must, however, collect sales tax from
your customer on the sales price or rental payments.

6. Supplies,
   maintenance and repair parts

With
regard to supplies and parts:

a. Assuming
that copiers used by Company A do not qualify as manufacturing equipment, all
supplies purchased for repair or maintenance are regarded as consumed by
Company A, and Company A is subject to sales tax for those items. However, commercial printers and copy
service businesses are entitled to purchase certain materials and supplies used
in the printing or copying process tax free if those materials become a
component part of finished goods produced for resale. Copy machine toner, for instance, fits within the category of
tax-exempt supplies purchased by Company A if Company A uses the toner to
produce copies or documents for resale to Company B. The exemption does not apply to purchases by companies that are
not in the business of selling copying or printing services (Company B). For these companies, the purchase of toner
or toner cartridges is like the purchase of other office supplies used by the
companies for their own consumption.

b. If Company A sells or rents copiers to
Company B and provides service or repair for those machines, charges for labor
to repair the copiers are taxable. If
the charge includes the sale parts and supplies (such as toner kits) to Company
B, the entire amount is taxable.

7. Personnel
   charges

a. Placement fees are not subject to sales
tax.

b. If Company A outsources excess work to
Company C, Company A may give Company C
an exemption certificate for taxable items that A purchases from C for
resale. If Company C is billing Company
B directly, Company C is liable to collect taxes on taxable transactions.

Please
contact our Customer Service Division if you require further clarification.

For
the Commission,

Joe
B. Pacheco,

Commissioner