By Liz Cha and Amy Nogid

The Utah State Tax Commission ruled that sales to financial institutions in Utah of the right to use online banking software, finance and budget tool software, online bill payment software, mobile banking software, and a mobile banking application are sales of tangible personal property subject to Utah sales and use tax. In its request for a letter ruling, the taxpayer acknowledged that the budget tool software and mobile banking application were taxable. However, the taxpayer argued that it was providing online banking, online bill payment and mobile banking services, which are non-taxable data processing and custom information services under both the statute and the essence of the transaction test. However, the Tax Commission, applying the essence of the transaction test, concluded that all of the transactions constituted sales of the right to use the taxpayer’s tangible personal property, i.e., the prewritten application software, which enables financial institutions to offer online services to customers. Utah Private Letter Ruling No. 15-005, Nov. 16, 2015 (released January 2016).