What Utah sales taxes apply to a company handling Olympic athlete food services, its food sales to the Olympic Organizing Committee, and the restaurant equipment used and later transferred as compensation?

Plain-English summary

A food services company handling the athlete feeding operation for the 2002 Salt Lake Winter Olympics asked the Commission to sort out sales tax across three linked issues: what tax rate to collect at various Olympic venues, whether its food sales to the Organizing Committee ("ORGANIZATION") were exempt, and how sales tax applied to restaurant kitchen equipment that would ultimately be transferred to the company as compensation for its services.

Tax rates by venue. Rates vary by Utah city/county and combine up to three components shown on the Commission's quarterly Tax Rate Chart: (1) the base "combined sales rate," (2) a 1% tourism-restaurant tax ("FG"), and (3) in resort areas, an additional 1% resort revenue tax ("RR"). The ruling gives concrete examples current as of October 1, 2001: 7.6% in one county area (6.6% base + 1% tourism-restaurant), and 8.35% in a resort-area city (6.35% base + 1% tourism-restaurant + 1% resort revenue). Because most Olympic sales would occur in a later quarter, the Commission warned rates could change and pointed the company to its website and a named staff contact to verify current rates closer to the Games.

Food sales to the Organizing Committee. As a 501(c)(3), the Committee qualifies as a charitable institution under § 59-12-104(8), so its purchases of food for its own consumption from the company are exempt — food isn't among the specified exceptions to that exemption. The Committee can also buy food tax-free from the company under the resale exemption if it plans to resell it. But the Committee's own subsequent sale of meals is taxable unless those meals aren't available to the general public (§ 59-12-104(12)(a)(i)(B), § 59-12-104.1(2)(b)(iii)(B)). Either way — whether the Committee's purchase is exempt as a charitable purchase or as a resale — the food company must keep records under Rule R865-19S-23 verifying the sale's nontaxable status, specifically a completed exemption certificate (Form TC-721) from the Committee.

Restaurant equipment. Several distinct scenarios were addressed:

• If the Committee buys equipment directly itself, it must pay sales tax on that purchase.
• If the food company buys equipment for resale to the Committee, the company can buy it tax-free (with a completed exemption certificate) since it's purchasing for resale.
• The Committee's own purchase and later disposal of the equipment, done in the course of organizing/conducting the Olympic Games, counts as a sale made in the conduct of the Committee's charitable functions under § 59-12-104.1 — exempt.
• Notably, when the Committee later "gives" the equipment to the food company as in-kind compensation for the food and labor used to feed athletes, the Commission still treated this as an exempt sale, even though it's technically an exchange of valuable consideration (services for equipment) — restaurant equipment simply isn't an item the Committee must collect sales tax on under its § 59-12-104(8) charitable exemption.
• If instead the food company buys equipment specifically "on behalf of" the Committee (rather than for its own resale inventory), a narrower rule applies (Rule R865-19S-58(B)(4)): this can only be tax-free if either (a) the equipment is clearly identified/segregated and becomes part of real property owned by the Committee, or (b) the Committee itself pays the vendor directly for it.

What this means for you

Event organizers and vendors operating across multiple Utah venues

Don't assume a single statewide sales tax rate — check the current Tax Rate Chart for each specific venue, since rates combine a base rate plus tourism/resort add-ons that vary by city and county, and can change quarter to quarter.

Businesses selling to charitable event organizers

Get a completed exemption certificate (Form TC-721) for every tax-free sale to a charitable purchaser, whether the exemption is based on the buyer's charitable status or on a resale purpose — proper recordkeeping under Rule R865-19S-23 is what protects your own nontaxable treatment of the sale.

Vendors receiving in-kind equipment or property as compensation for services

An exchange of equipment for services rendered to a charitable organization can still qualify as an exempt "sale" from the charity's side if the item exchanged isn't one the charity must collect tax on — but confirm this against the specific exemption category the item falls under, since not every in-kind exchange will qualify.

Charitable organizations buying equipment through a vendor or contractor "on their behalf"

If you want tax-free treatment on equipment a vendor purchases specifically for you (rather than the vendor's own resale inventory), either pay the vendor directly yourself, or ensure the equipment becomes part of real property you own — a purchase "on behalf of" you that stays as your movable personal property, paid for by the vendor, generally won't qualify.

Common questions

Q: Is Utah's sales tax rate the same at every Olympic venue?
A: No. Rates vary by city and county and combine a base sales/use rate with add-on tourism-restaurant and (in some areas) resort revenue taxes — check the current Tax Rate Chart for each specific location.

Q: Are the Olympic Organizing Committee's food purchases exempt from sales tax?
A: Yes, when purchased for its own consumption, as a 501(c)(3) charitable institution — and it can also buy food tax-free for resale, though its own resale of meals to the general public is then taxable.

Q: Is giving equipment to a food vendor as compensation for services a taxable sale?
A: Here, no — even though it's an exchange of valuable consideration, restaurant equipment isn't an item the Committee had to collect sales tax on under its charitable exemption, so the transfer was treated as exempt.

Q: Can a vendor buy equipment tax-free "on behalf of" a charity?
A: Only if the equipment becomes part of real property the charity owns, or the charity pays the vendor directly — buying on the charity's behalf while the charity's own personal property stays movable and the vendor pays doesn't qualify.

Q: Does this ruling apply to my event's food service or equipment arrangements?
A: Not automatically. This is a private letter ruling binding only on the Commission as to this taxpayer's specific facts. It can't be relied on as binding by anyone else, though it may carry weight if your facts closely match.

Citations and references

Statutes and rules:

• Utah Code Ann. § 59-12-104(8) (charitable institution sales tax exemption)
• Utah Code Ann. § 59-12-104(12)(a)(i)(B) (meals not available to general public exemption)
• Utah Code Ann. § 59-12-104.1(2)(b)(iii)(B); § 59-12-104.1 (charitable institution's own sales exempt within its charitable functions)
• Utah Admin. Rule R865-19S-23 (recordkeeping for nontaxable sales; exemption certificate)
• Utah Admin. Rule R865-19S-58(B)(4) (purchases made on behalf of a charitable institution)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/01-028.pdf

Original ruling text

REQUEST
LETTER

01-028

Response: 10/22/01

COMPANY

NAME

ADDRESS

PHONE

Re: Winter Olympics Sales Tax

Dear Sir:

COMPANY will handle the food
operation at the Winter Olympics. This
letter is a request for clarification on the following sales tax issues:

1.
The rate of sales tax
to be collected

a. Is the rate the same throughout the areas the
Olympics are held?

b. Is the hospitality tax included in the rate?

c. Exactly what rate of tax is to be collected
at each Olympic site?

2.
CITY Olympic
Committee � Purchase of Food

a. Is the Committee liable for sales tax on any
of its purchases?

b. If it is liable, on what purchases is it
liable?

c. If the CITY Olympic Committee buys prepared
food and re-sells it, what is the sales tax obligation of the Committee?

d. What is the sales tax obligation of the
seller of the prepared food to the Committee?

3.
Purchase of Equipment

The
ORGANIZATION will obtain restaurant kitchen equipment to be used to feed the
athletes at no cost to the Committee or the athletes. COMPANY will handle the feeding operation for no monetary
fee. What are the sales tax
implications if:

a. COMPANY buys
the equipment and immediately sells it to ORGANIZATION.:

i. What
are the sales tax obligations of COMPANY?

ii. What
are the sales tax obligations of ORGANIZATION.?

b. ORGANIZATION. buys
the equipment and pays with ORGANIZATION

c. COMPANY
buys the equipment on behalf of the ORGANIZATION

i. Does
COMPANY pay sales tax on the purchase?

At the end of the Olympics ORGANIZATION
will give the restaurant kitchen equipment to COMPANY to compensate COMPANY for food and labor used in feeding the athletes.

d.
Will COMPANY owe sales
tax on this transfer of equipment?

If the answer is Yes, on what value will the sales tax
be computed?

Your reply is awaited.

NAME

Tax Manager

RESPONSE
LETTER

DATE

COMPANY

NAME

ADDRESS

RE: Advisory Opinion � Taxation of Food Services Relating to the DATE
Winter Olympics

Dear Mr. NAME:

You have requested information concerning the taxes that COMPANY
should collect on its food sales during the DATE Winter Olympics. You have also inquired whether your food
sales to the ORGANIZATION are exempt and whether the restaurant equipment used
by COMPANY in providing its services during the Olympics may be purchased
exempt from taxation.

Rate Of Taxes.

The
sales and use tax, as well as other taxes applied on taxable sales, varies in
Utah and depends upon the political jurisdiction in which the sale is
made. Enclosed is the Tax Commission�s
latest Tax Rate Chart, which is effective as of October 1, 2001. This chart is updated quarterly and shows
the tax rates applicable on sales occurring in the various Utah cities and
counties. A retailer may use this chart
to determine the correct combination of taxes to charge on a sale in any
particular location.

Restaurants should collect three different taxes on its
sales, which are identified on the Tax Rate Chart as: (1) the �combined sales
rate� from the Sales & Use Tax Return section; (2) the tourism-restaurant
tax (�FG�) from the Tourism Section; and (3) the resort revenue tax (�RR�) from
the Resort section. For example, if COMPANY
sells food in any area of COUNTY (other than CITY), the combined tax rate that
it should apply would be 7.6% (6.6% sales and use tax and 1% tourism-restaurant
tax). Similarly, if a sale occurs in CITY
in COUNTY, the combined tax rate would be 8.35% (6.35% sales and use tax, 1%
tourism-restaurant tax, and 1% resort revenue tax). Rates for these and any other areas would be applicable for the
current quarter, from October 1, 2001 to December 31, 2001.

However,
most of your sales will occur in the quarter beginning DATE. It is possible that some tax rates may
change between this quarter and next.
To ensure you apply the correct tax rates on sales occurring during the
Olympic Games, you may view any changes at our website, www.tax.ex.state.ut.us, or contact EMPLOYEE
at the Tax Commission at (PHONE after DATE,
to determine if the rates in the enclosed Tax Rate Chart will remain unchanged
for the next quarter.

Sales of Food to or by ORGANIZATION.

ORGANIZATION is a section 501(c)(3) entity and, as such,
is considered a charitable institution for purposes of the Utah Sales and Use
Tax Act. Utah Code Ann. �59-12-104(8)
provides that sales to a charitable institution are exempt from taxation, with
certain exceptions. Accordingly, ORGANIZATION
is exempt from taxation when it purchases food from COMPANY for its own
consumption, since food is not specified as an exception from the exemption.

ORGANIZATION may also purchase food from COMPANY tax-free
that it plans to resell using the resale exemption. However, ORGANIZATION subsequent sales of meals are taxable
unless the meals are not available to the general public. See Utah Code Ann. ��59-12-104(12)(a)(i)(B),
59-12-104.1(2)(b)(iii)(B).

In either situation where it is selling food to SLOC
tax-free, COMPANY is required under Utah Admin. Rule R865-19S-23 to keep
records verifying the nontaxable status of such sales. COMPANY should retain an exemption
certificate (enclosed Form TC-721) that is completed by ORGANIZATION and which
indicates the applicable exemption.

Taxation of Restaurant Equipment

ORGANIZATION must pay sales tax on any equipment it
purchases to provide its food services.
If, instead, COMPANY purchases the equipment for resale to ORGANIZATION,
it may purchase the equipment tax-free upon completing an exemption certificate
and presenting it at the time of purchase.

ORGANIZATION
purchase of restaurant equipment to provide food to athletes and its subsequent
disposal of the equipment after the Games would be considered sales made in the
conduct of ORGANIZATION charitable functions or activities in organizing and
conducting the Olympic Games. See Utah
Code Ann. �59-12-104.1. Accordingly,
any such sale would be exempt from sales and use tax.

Furthermore,
should ORGANIZATION �give� the equipment to COMPANY in exchange for providing
food services to the athletes, we would consider the transaction an exempt
sale. Although the transaction would be
considered an exchange of valuable consideration, restaurant equipment is not
an item on whose sale ORGANIZATION must collect sales tax under Section
59-12-104(8).

ORGANIZATION may, however, be liable for sales and use
tax if it purchases the equipment on �behalf of� ORGANIZATION unless certain
criteria are met. Although no current
statute or rule specifically addresses only the purchase of tangible personal
property on behalf of a charitable institution, Utah Admin. Rule
R865-19S-58(B)(4) (�Rule 58�) does address how tangible personal property may
be purchased tax-free for such an institution when those materials are
converted to real property. Rule 58
provides that:

(B)(4) Sales of materials are considered made to religious or charitable institutions and, therefore, exempt from sales tax, if:

a) the religious or charitable institution makes payment for the materials directly to the vendor; or

b) the materials are purchased on behalf of the religious or charitable institution.

(i) Materials are purchased on behalf of the religious
or charitable institution if the materials are clearly identified and
segregated and installed or converted to real property owned by the religious
or charitable institution.

While
the rule contemplates the purchase of tangible personal property that is
installed to real property, the Commission will also consider the purchase of
tangible personal property that remains tangible personal property to be exempt
when made on behalf of a charitable institution, but only if that institution
makes payment directly to the vendor.
Therefore, under this rule, COMPANY may purchase the equipment tax-free
on behalf of ORGANIZATION if the equipment is clearly identified and segregated
and it becomes part of realty owned by ORGANIZATION. Otherwise, COMPANY may only purchase the equipment tax-free on
behalf of ORGANIZATION if ORGANIZATION if the vendor pays directly.

Should you have any other questions, please contact us.

For
the Commission,

EMPLOYEE

Commissioner

enc.

MBJ/KC

01-028