Avalara Taxrates > Blog > Sales Tax News > Utah: Protection from Lightning Strikes is Exempt - Avalara

Utah: Protection from Lightning Strikes is Exempt

  • Jan 13, 2016 | Gail Cole

 Fees to protect your rented goods from lightning strikes are exempt from Utah sales tax.

The Utah Supreme Court recently determined that fees for a liability waiver program are not subject to Utah sales and use tax under the state Tax Code.

The fees are charged by a rent-to-own business whose customers acquire ownership of rented property once they have paid its full value. Fees for the liability waiver program are separate from the rental fees and are separately itemized on customer invoices. The liability waiver program ensures renters are not held liable for the cost of a rented product if it is damaged or destroyed due to fire, flood, smoke, theft, windstorm, or (my favorite) lightning.

The rental business has never applied sales or use tax to the rental fees and was found liable for those taxes during an audit conducted by the Utah State Tax Commission. In court, the Commission argued the fees were subject to tax because they were charged “in connection with the rental of tangible personal property.” Leases and rentals are taxable under Utah Code section 59-12-103(1)(k).

The Commission also based its case on its own regulation (UTAH ADMIN. CODE R865-19S-32(1)(a)), which reads as follows:

“A lessor shall compute sales or use tax on all amounts received or charged in connection with a lease or rental of tangible personal property.”


In its opinion, the Utah Supreme Court noted that participation in the liability waiver program is not mandatory for consumers and that at any time participation can be stopped. It found that “the administrative regulation impermissibly broadens the language of the statute.” To wit:

In connection with’ encompasses a wide variety of products and services that may be associated with the rental without actually being ‘for’ the rental.”

The Tax Commissions decision to apply sales tax to the liability wavier fees was therefore reversed. Read the opinion: 2016 UT 1.

Find it confusing to sort through what is and isn’t liable for sales and use tax in different states? Sales tax software helps simplify it. Learn how it works.

Sales tax rates, rules, and regulations change frequently. Although we hope you'll find this information helpful, this blog is for informational purposes only and does not provide legal or tax advice.
Gail Cole
Avalara Author
Gail Cole
Gail Cole
Avalara Author Gail Cole
Gail began researching and writing about sales tax in 2012 and has been fascinated with it ever since. She has a penchant for uncovering unusual tax facts, and endeavors to make complex sales tax laws more digestible for both experts and laypeople.