Does Utah sales tax apply to a heli-skiing operator's helicopter transportation, backcountry ski-guide services, and included meals?

Plain-English summary

A heli-skiing operator's accountants asked the Commission to rule on three parts of the business: (1) helicopter flights from a heliport to backcountry ski terrain, which they argued was exempt intrastate "air commerce" travel under a since-repealed administrative rule; (2) professional backcountry ski-guide service down the mountain; and (3) lunches provided to customers on all trips.

In its January 6, 1996 opinion, the Commission ruled all three components as follows:

1. Helicopter transportation is taxable. The old rule the accountants relied on (R865-19S-36, which had exempted air-commerce travel) was repealed August 15, 1995. Under § 59-12-103(1)(b), charges paid to common carriers for transportation are taxable unless federal law prohibits it — and federal law doesn't exempt intrastate air passenger service (only certain interstate transportation is federally protected from state taxation).
2. Guide services are taxable. Under § 59-12-103(1)(f), charges for recreational tours (like ski tours) are taxable, including charges for guide service, entrance onto private land, and equipment use — the Commission treats professional backcountry ski guiding as part of a taxable recreational activity.
3. Meals can be handled tax-free at the customer level. The outfitter can buy its food tax-free for resale and then collect sales tax from customers on the meal charge — or, alternatively, pay sales tax itself on the food purchase and skip charging customers, as long as the meal charge is separately itemized from the taxable transportation and guide charges on the invoice.

The taxpayer requested reconsideration, arguing (a) a recent U.S. Supreme Court decision — Oklahoma Tax Comm'n v. Jefferson Lines, Inc. — and new federal legislation limiting state taxation of interstate passenger service should change the helicopter analysis, and (b) the guides were highly trained safety/avalanche professionals, not simple tour guides. In its January 23, 1996 reconsideration response, the Commission held firm on both points: neither Jefferson Lines nor the federal legislation limits taxation of intrastate air passenger service (they address interstate transportation), so the helicopter charges remained taxable; and guide charges remained taxable as recreational-activity charges regardless of the guides' professional training. The Commission noted the taxpayer could petition for a declaratory judgment under Rule R861-1A-4 within 30 days if it still disagreed, or pursue a change through the state legislature.

What this means for you

Heli-skiing, helicopter tour, and similar air-transport operators

Don't assume intrastate helicopter or small-aircraft passenger transport is automatically exempt as "air commerce" — federal law only limits state taxation of certain interstate transportation, and Utah's own prior air-commerce exemption rule was repealed in 1995. Confirm current Utah rules before assuming an air-travel exemption applies.

Backcountry, ski, and other recreational guide services

Professional training, safety certifications, and life-safety responsibilities (avalanche rescue, first aid) don't remove a guide service from Utah's recreational-tour sales tax base — the Commission taxes it as part of the recreational activity regardless of the guides' skill level.

Tour operators including meals in a package

You have a choice: collect tax from customers on meals (buying food tax-free for resale), or absorb the tax yourself on your food purchases and skip charging customers — but either way, itemize the meal charge separately from your taxable transportation/guide charges so the exempt treatment is clearly documented.

Common questions

Q: Is intrastate helicopter transportation exempt as "air commerce"?
A: Not under this ruling — an earlier Utah rule exempting air-commerce travel was repealed in 1995, and federal law doesn't bar states from taxing intrastate air passenger service.

Q: Does a guide's professional training or safety certification make guide charges exempt?
A: No. The Commission taxes guide service charges as part of a taxable recreational tour/activity, regardless of the guides' training level.

Q: How can I avoid charging sales tax on meals included in a tour package?
A: Pay sales tax yourself on your food purchases (rather than buying tax-free for resale), and separately itemize the meal charge from your taxable transportation and guide charges.

Q: Does this ruling apply to my tour or transportation business?
A: Not automatically. This is a private letter ruling binding only on the Commission as to this taxpayer's specific facts. Another taxpayer can't rely on it as binding, though it may carry weight in a later appeal depending on how closely the facts match.

Citations and references

Statutes and rules:

• Utah Code Ann. § 59-12-103(1)(b)(I) (transportation charges taxable absent federal prohibition)
• Utah Code Ann. § 59-12-103(1)(f)(I) (recreational tour/activity charges taxable)
• Utah Admin. Rule R861-1A-4 (declaratory judgment petition)
• Oklahoma Tax Comm'n v. Jefferson Lines, Inc., 514 U.S. 175 (1995) (interstate passenger transportation taxation limits, not extended to intrastate air service)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/96-004.pdf

Original ruling text

96-004

Responses
January 6, 1996 and January 23, 1996

Request

RE: Request for Sales Tax Ruling on XXXXX
activities

Ladies
and Gentlemen:

We
are the Certified Public Accountants for XXXXX. They have asked us to write you for a ruling as to whether the activity
which they are engaged in is subject to Utah Sales Tax.

FACTS

XXXXX
has two main components to their business.
The first component is that they are a common carrier for persons
traveling in air commerce. They have a
heliport located at XXXXX and they transport individuals from that heliport to
various spots in the XXXXX Mountains.

The
second major component of their business is that they offer a guide service
from the designated spot in the XXXXX to the bottom of the mountain.

XXXXX
also has another type of business which they render, which is custom tour
charters. This is where three, eight or
twelve people will rent the helicopter for a day and the helicopter flies these
people to any area where the individuals desire to go. On this custom tour charter XXXXX also
supplies professional guides who guide the customer in their skiing activity.

All
three activities mentioned above, XXXXX also supplies a lunch for their
customers.

LAW

It
appears to us that there are two main areas of the Sales Tax law which should
be addressed. The first is travel in air commerce subject to Sales Tax. I believe that it is fairly clearly stated
in Administrative Rules of the Utah State Tax Commission in Rule R865-19-36S
that traveling in air commerce is not taxable.
The ruling states at part B, �All fares paid for intra-state
transportation of persons to common carriers having established routes are
subject to tax except � (3) amounts paid for persons traveling in air
commerce.�

The
second question that must be addressed is, 'should professional guide service
be taxed.' Section 59-12-103, Sales and Use Tax Base, does not indicate in any
of the language that any professional services should be taxed. The only time services are taxed is when
they are in connection with repair or renovations of tangible personal property
or very closely related with services to tangible personal property.

CONCLUSIONS

It
appears to us that the activity in which XXXXX is involved is made up of three
parts. The first part is the traveling
in air commerce and it is our opinion that the administrative rule R865-19-36S
is very clear that this activity is not subject to Sales Tax. This activity is very clearly a charter
airline service. Customers purchase
tickets which allows them to ride on a helicopter from XXXXX, Utah to some
designated points in the XXXXX.

The
second portion of XXXXX business is a guide service. This service consists of a professional person guiding skiers down
a mountain. These guides are performing
a professional service which can save lives of the skiers, are extensively
trained, and are professionals in every sense of the word.

The
third portion of XXXXX business is the providing of lunch for their customers. At the present time, Sales Tax is being paid
to the suppliers of these lunches and therefore, XXXXX should not be liable for
Sales Tax in connection with these meals. These meals are similar to meals
supplied customers of airlines going throughout the world.

As
a result of the above discussion, we respectively request that the Utah State
Tax Commission supply XXXXX as representative for XXXXX, a written statement
indicating the Utah State Tax Commission's position on whether XXXXX is
responsible to collect and remit Utah State Sales Tax. Time is of the essence in this request as
the company will be starting into their business season shortly after the first
of the year, and they need to know if Sales Tax should be collected.

It
is our understanding that Sales Tax would not have to be collected on any of
the above activities.

We
are thanking you in advance for your prompt response to this request.

Sincerely,

XXXXX

XXXXX

RE:
Advisory Opinion - Application of sales tax to XXXXX tour activities

Dear
XXXXX,

We
have received your request for information regarding the taxability of services
provided by XXXXX. We find as follows:

1. Helicopter transportation. XXXXX provides intrastate transportation
   from the XXXXX heliport to locations in the XXXXX Mountains. Section 59-12-103(1)(b) imposes sales tax on
   amounts paid to common carriers for transportation unless otherwise exempted by
   federal law. Since federal law does not
   exempt taxation of intrastate common carrier service, charges for this service
   are taxable. (Utah Administrative Rule
   R865-19S-36 was repealed on August 15, 1995.)

2. Guided tours. Section 59-12-103(1)(f) imposes sales tax on charges for
   recreational tours, such as ski tours.
   Charges to XXXXX customers for guide service, entrance onto private
   lands, use of facilities or use of equipment are taxable.

3. Meals.
   If XXXXX provides meals to its tour participants, it may purchase the
   food tax free for resale.
   Alternatively, if XXXXX pays tax on its purchase of food used in the
   meals, it need not collect tax from its customers on charges for the
   meals. However, in that case XXXXX must
   separately itemize charges for the meals on the invoice or receipt. Charges for exempt items or activities must
   be billed separately from taxable charges.

Vendors
who are required to collect Utah sales tax must have a Utah tax number. An application for a tax number is enclosed
(TC9). XXXXX may claim a tax exemption
for its food purchases by presenting the food retailer with a signed exemption
certificate (TC21). Both forms are
enclosed.

Please
let us know if we can be of further assistance

For
the Commission,

Alice
Shearer

Commissioner

Alice
Shearer

Commissioner

Utah
State Tax Commission

210
North 1950 West

Salt
Lake City, UT 84134

RE:
Advisory Opinion - Application of Sales Tax to XXXXX activities

Dear
Commissioner Alice Shearer:

After
receiving your advisory opinion, in connection with XXXXX. sales tax problem, I
talked with Commissioner Joe Pacheco.
He recommended that I request a reconsideration of the sales tax problem
of XXXXX. Commissioner Pacheco
indicated that the State Tax Commission was in the process of reevaluating
their position on charter airplane flights in interstate commerce and
intrastate commerce.

It
was my understanding that the State Tax Commission decided to change their
opinion on such matters as a result of the XXXXX case which was decided on
XXXXX. It is my understanding from
Commissioner Pacheco that the United States Congress in recent weeks had passed
legislation which would effect the decision which was reached in this
case. As a result of the above, we
respectfully request that the Utah State Tax Commission take another look at
the taxable status of XXXXX.

Also
in your letter of January 6, 1996, you indicated that the second part of the
XXXXX activities, which is guiding skiers down back country terrain, is a
guided tour. This is not the case. The guides are highly trained professional
people whose main responsibility is to advise skiers where to ski so they are
not in avalanche danger. They also give
them professional instruction on how to ski in powder snow. These individuals are also highly trained in
first aid and avalanche rescue. As
stated earlier, these are highly trained professionals. We would appreciate it very much if you
would reconsider your position on charges for these professional services.

I
would appreciate the opportunity to meet with you and discuss the above
questions at your convince.

As
a result of your prior letters, XXXXX is collecting and will pay sales tax on
their operation until a satisfactory solution is obtained. It is critical to their business that this
problem be resolved as soon as possible. Their customers are very unhappy with
having to pay sales tax on this purchase.
This additional cost could substantially effect their sales. The customers indicate to the officers of
the corporation that other surrounding states do not charge sales tax on such
an activity.

If
you have further questions or if we can give you further information to help
you make a decision, please do not hesitate to contact us.

Enclosed
please find a copy of your January 6, 1996 letter and a copy of our December
28, 1995 request for sales tax ruling letter.

Sincerely,

XXXXX

XXXXX

Re:
Advisory Opinion Taxability of charges by XXXXX.

Dear
XXXXX,

In
response to your request for reconsideration of our January 6th advisory
opinion, we find as follows:

Section
59-12-103 (1)(b)(I) of the Utah Code imposes sales tax on the amount paid for
transportation unless otherwise prohibited by federal law. The Jefferson Lines case imposes certain
limitations on taxation of interstate activities, and Congress recently imposed
limitations on the state's authority to tax interstate motor carrier passenger
service. Neither the case nor the
congressional act prohibit taxation of intrastate air passenger service. Therefore, XXXXX charges for passenger
service are taxable under the section cited.

We
understand your client's concerns that surrounding states may have more
favorable taxing schemes. However, we
have no authority to grant an exception to current state law. Your client may wish to pursue the matter
with the state legislature.

Under
section 59-12-103 (1)(f)(I), charges for recreational activities are subject to
sales tax. The Commission has
interpreted this language to include charges for guide services which are part
of the recreational activity.

If
you still object to our determination, your client may petition the Commission
for a declaratory judgment under Utah Administrative Rule R861-1A-4 (copy
enclosed) within 30 days of the date of this letter.

Please
let us know if you have further questions.

For
the Commission,

Alice
Shearer

Commissioner