What qualifies as a concession for privilege tax exemption in Utah? SLBE v. Tax Comm'n Explained

The Utah Court of Appeals recently addressed when a business operating on government property qualifies for the concession exemption from privilege tax in SLBE v. Tax Comm’n. This case provides important guidance for practitioners dealing with tax exemptions for businesses operating on public property.

Background and Facts

Rio Grande Café operated a restaurant in the state-owned Denver and Rio Grande Depot under a lease with Utah. The Salt Lake County Board of Equalization assessed both privilege tax and escaped property tax against the café in 1995. Rio appealed, claiming entitlement to the concession exemption under Utah Code section 59-4-101(3)(a), which exempts “the use of property which is a concession in, or relative to, the use of a public airport, park, fairground, or similar property which is available as a matter of right to the use of the general public.”

Key Legal Issues

The court addressed two primary questions: (1) whether Rio qualified for the concession exemption from privilege tax, and (2) whether Rio could recover litigation expenses under the Small Business Equal Access to Justice Act. The critical issue was defining “concession” within the statutory interpretation framework.

Court’s Analysis and Holding

Applying correctness review, the court defined “concession” using dictionary definitions as “a grant of property or a franchise by a government entity to be used for a specific purpose.” The court rejected the Board’s argument to adopt Michigan’s stricter interpretation requiring specific obligations like minimum hours of operation. Rio’s lease specifically stated the state’s desire to have a restaurant operated “for the convenience of employees, visitors, and the general public,” satisfying the concession definition. On the second issue, the court held that privilege tax assessment constitutes revenue raising rather than business regulation, precluding Small Business Act relief.

Practice Implications

This decision establishes that Utah courts will apply the plain meaning of statutory terms when interpreting tax exemptions, even when construing them strictly against the exemption seeker. Practitioners should focus on whether the government entity granted property for a specific public purpose rather than seeking to impose additional operational requirements not found in the statute’s text.