00-012
Response
June 27, 2000
REQUEST LETTER
March 29, 2000
Re: COMPANY Letter
Ruling Request Taxpayer FEIN: #####
Dear Ms Rees:
We respectfully request a ruling regarding the
administration of your jurisdiction's sales tax in light of the following facts
and circumstances. By disclosing our
company name and taxpayer identification number, we desire a ruling that we may
rely on in the occurrence of an audit or examination.
FACTS
COMPANY is a manufacturer and distributor of household
products, which are sold through home based franchised distributors and
consultants. Please note, distributors
and consultants are independent business owners and are not employees of
COMPANY.
Current Process
Sales are made at COMPANY parties, which are organized
by the Consultant and designed to showcase PRODUCTS products to consumers.
During the party, or immediately thereafter, the consumers place orders with
the Consultant. The Consultant collects the orders and the money from the
consumer. The amount collected includes sales tax, which is computed on the
retail selling price. The Consultant then places the individual orders with a
Distributor and remits all collected monies. The Distributor places the order
with COMPANY via computer or telephone and remits to COMPANY the normal sales
price charged to all distributors by COMPANY. The Distributor is responsible
for paying the net earnings to consultants, issuing 1099's to the Consultants,
and remitting sales tax to the proper jurisdictions. COMPANY is responsible for
shipping the product via common carrier to the consultant or to the consumer.
Proposed Process
Hereinafter, Distributors and Consultants will be
referred to as Independent Business Owners (IBOs") Under the proposed process, with the
exception of some minor differences (formal
training, coordination of rallies, etc), the
responsibilities of the IBOs will be equivalent. IBOs will order COMPANY
products directly from COMPANY via the computer or telephone. The IBOs will be
charged for their order through their own credit cards. The charge will include
sales tax, computed on the retail selling price, which will be remitted to the
proper jurisdictions by COMPANY. The IBOs will receive a confirmation invoice
or notice, which will break out the product price, shipping charges, and sales
tax. COMPANY will also be responsible for paying net earnings to the IBOs,
issuing 1099's, and will continue shipping the product via common carrier
directly to the IBO or to the consumer.
ISSUE
Under the proposed process, may COMPANY collect and
remit sales taxes, which are received by the IBOs from the end consumers,
directly to your jurisdiction?
CONCLUSION
We respectfully request approval for the proposed tax
reporting process. Such a process affords benefits for both COMPANY and the
jurisdiction. The primary benefit to
COMPANY is the ability to centralize its tax reporting process, thus removing
the tremendous compliance burden from the many IBOs. The primary benefit to the
jurisdiction is the ability to receive all sales tax dollars owed, from one
taxpayer; thus reducing its administrative cost, while insuring tax compliance.
Please send your response to the above referenced
issue to
COMPANY
NAME
Our intention is to collect and remit the proper amount
of sales tax on the sale of our products to your jurisdiction. We appreciate your time and attention to
this matter. If you have any questions
related to the facts as presented, please contact NAME #####
Very truly yours
NAME
RESPONSE
LETTER
June 27, 2000
NAME
COMPANY
RE: Request
for Ruling on Sales Tax Collection and Reporting Variations
Dear NAME,
You have proposed that COMPANY Corporation (ACOMPANY@)
be allowed to collect and remit sales tax on the retail price of all products sold
by its independent distributors in Utah.
Utah currently has a program where multi-level marketers, such as
COMPANY, are allowed to collect and remit the sales tax instead of each
independent distributor being required to do so separately. To participate in this program, you need to
contact NAME in the Compliance Section of the Auditing Division at #####. She will provide you with information about
this program, including the specific reporting requirements and the contract
that COMPANY needs to complete in order to participate in this program.
Please contact us if you have any other questions.
For the Commission,
Marc B. Johnson
Commissioner