Opinion ID: 1291283
Heading Depth: 4
Heading Rank: 2

Heading: Application of the Privilege Tax

Text: ¶ 30 We next turn to the Counties' contention that the Commission erred in determining that intangible property is exempt from the privilege tax levied in Utah Code Ann. § 59-4-101. This is a question of law. As such, we review it for correctness and accord the Commission's decision no particular deference. See Utah Code Ann. § 59-1-610(1)(b); Salt Lake City Southern R.R., 987 P.2d at 596. ¶ 31 Utah Code Ann. § 59-4-101(1)(a) provides, with exceptions not relevant here, that a tax is imposed on the possession or other beneficial use enjoyed by any person of any real or personal property which for any reason is exempt from taxation, if that property is used in connection with a business conducted for profit. The Counties argue that the plain language of the statute applies to the exemption for intangible property under Utah Code Ann. § 59-2-1101(2)(g) because WilTel's intangible property is used in connection with a business for profit. The Counties also contend that all exemptions to the privilege tax are listed in section 59-4-101 and because intangible property is absent from the list, WilTel's intangibles are subject to taxation. ¶ 32 We disagree. Because we decide this issue on the ground that the Counties' proposed application of section 59-4-101's privilege tax would be unconstitutional, we need not reach the arguments concerning the plain language of the statute. ¶ 33 Article XIII, section 2(10) of the Utah Constitution provides in relevant part: Intangible property may be exempted from taxation as property or it may be taxed in such manner and to such extent as the Legislature may provide, but if taxed as property the income therefrom shall not also be taxed. In accordance with these provisions, the legislature has exempted intangible property from taxation as property under Utah Code Ann. § 59-2-1101(2)(g) and has instead chosen to tax its income. Utah Code Ann. § 59-7-101(31)(b) provides that `Utah taxable income' includes income from tangible or intangible property located or having situs in this state, regardless of whether carried on in intrastate, interstate, or foreign commerce. ¶ 34 We observed in Thiokol Chemical Corp. v. Peterson, 15 Utah 2d 355, 358, 393 P.2d 391, 393 (1964), that the privilege tax was enacted to close any gaps in the tax laws by imposing a tax on any property possessed or used in connection with a business for profit which was otherwise exempt from taxation. However, intangible property is taxed on income and, therefore, while exempt from property tax, has not escaped taxation. There is no gap to close. Thus the application of the privilege tax to intangible property would constitute double taxation and defeat the intangible exemption. Because the State has chosen to tax the income from intangible property, it is prohibited from taxing the intangible property itself. The extension of the privilege tax to intangible property would violate this prohibition and would therefore be unconstitutional.