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