00-002

Response April 26, 2000

REQUEST LETTER

December 1, 1999

RE: Advisory Opinion on Sales Tax

Business Description:

COMPANY is an Internet commerce company that sells household and grocery items to over‑seas residents. The company has no sales within the state of Utah or even in the United States. All of the items are purchased over the Internet for locations outside of Utah. It is our opinion that under these circumstances no Utah State Sales Tax be assessed on our over‑seas sales.

Request:

We would appreciate an advisory opinion related to the handling of Utah State Sales Tax

for our company. If more information is needed to prepare the opinion you can contact

NAME.

Sincerely,

Michael Ricks, Accountant

RESPONSE LETTER

April 26, 2000

RE: Sales Tax Liability on Overseas Sales

Dear NAME,

COMPANY is an Internet commerce company that sells household and grocery items to overseas residents. You have requested that the Tax Commission issue an advisory opinion stating that Utah sales tax is not due on COMPANY transactions.

Utah Admin. Rule R865-19S-44(A) (ARule 44") provides that sales made in interstate commerce or, as is the case here, international commerce are not subject to Utah sales tax. However, the rule further provides that the mere fact that the goods purchased in Utah are transported out of Utah is not enough to constitute the transaction of a sale in interstate or international commerce. If the goods are delivered to the buyer or the buyer=s representative in Utah, the sale is not in interstate or international commerce, even though the buyer is not a resident of Utah and intends to transport the goods outside of Utah. In such a case, the sale is subject to Utah sales tax.

Section (B) of Rule 44 provides that before a sale qualifies as an interstate or international sale, the following must be complied with:

1. the transaction must involve actual and physical movement of the property sold across the state line;

2. such movement must be an essential and not an incidental part of the sale;

3. the seller must be obligated by the express or unavoidable implied terms of the sale, or contract to sell, to make physical delivery of the property across a state boundary line to the buyer;

You have not specified how the goods sold by COMPANY are delivered to the out-of-Utah purchasers. We will presume that you are required to deliver the goods outside of Utah and that you use a common carrier to deliver the goods. In this case, your transactions would qualify as interstate or international sales and would not be subject to Utah tax. However, if title to the goods passes in Utah and you deliver the goods other than by common carrier, the sale is not considered an interstate or international sale, and it is subject to Utah sales tax.

Please contact us if you have any other questions.