REQUEST
LETTER
01-024
Response 8/15/01
NAME
ADDRESS
TAX REPRESENTATIVE
Utah State Tax Commission
1950 W. 210 N.
Salt Lake City, UT 84134
RE: Inquiry about exemption from state sales tax
Dear NAME,
Thank you for the letter to the NAME dated DATE (the
letter from Auditing Division follows below).
In that letter you stated that sales tax is not due on items purchased
as our EVENT under the following circumstances:
“…..the COMPANY did not use an auctioneer or auction company, and paid the vehicle dealer the agreed sales price for the auctioned vehicles….”
I have one additional question. Is the exemption from sales tax still applicable if a
professional auctioneer is used, but that professional auctioneer is not
charging the COMPANY for this event? In
other words, the professional auctioneer is donating his/her services.
We are planning the YEAR EVENT and need this information
at your earliest convenience. Thank you
for considering this question and for your assistance in the past.
Sincerely,
NAME
NAME
ADDRESS
RE: Sales Tax Exemption for COMPANY
Dear NAME,
This letter is in response to a telephone request
regarding the taxability of vehicles auctioned at a recently held fundraising
event. We understand that COMPANY is a
501(c)(3) entity and is therefore exempt from sales and use tax on both its
purchase and sale transactions. The
following is our understanding of the fundraiser.
A dealer placed three motor vehicles with the COMPANY on consignment. The vehicles were sold through an auction at the COMPANY annual fundraiser. The COMPANY did not use an auctioneer or auction company, and paid the vehicle dealer the agreed sales price for the auctioned vehicles. The amount paid to the dealer was not the same amount as the amount received from the winning bids.
You asked if the sales tax was due on the vehicles and if
so, on what amount: the amount the COMPANY
paid to the dealer or the proceeds received from the auction. Based upon the facts you presented, sales
tax is not due when the individual buyers register the vehicles. The COMPANY should prepare, on its official
letterhead, a bill of sale for each of the vehicle buyers. This bill of sale will enable the buyer to
register the vehicle without paying sales tax.
In your telephone conversation, you also indicated the COMPANY
intends to hold a similar type of fundraising auction annually, and would like
an advisory opinion from the Tax Commission concerning sales taxability under
varying scenarios. We are forwarding to
the Commissioners, attention TAXPAYER REPRESENTATIVE.
Respectfully,
TAX PAYER REPRESENTATIVE
RESPONSE
LETTER
DATE
NAME
ADDRESS
RE: Advisory Opinion – Auctioneers and Sales Tax Exemptions
Dear NAME
In a letter of DATE, Auditing Division informed you that
a Section 501(c)(3) entity such as the COMPANY is exempt from both collecting
sales tax on its sales and paying sales tax on its purchases. Utah Code Ann. §59-12-104(8). The issue now before us is whether sales tax
must be collected on a sale conducted by an auctioneer who donates his or her
services to the COMPANY.
When an auctioneer is deemed to be the retailer of the
item he or she auctions, sales tax must be collected on the sale, even if the
owner of the property is itself an entity exempt from collecting or paying
sales tax. Utah Admin. Rule
R865-19S-45(A) provides that an auctioneer is acting as a retailer under the
following circumstances:
Every auctioneer, consignee, bailee, factor, etc., entrusted with possession of any bill of lading, custom house permits, warehousemen's receipts, or other documents of title for delivery of any tangible personal property, or entrusted with possession of any of such personal property for the purpose of sale, is deemed to be the retailer thereof, and is required to collect sales tax, file a return, and remit the tax.
Accordingly, an auctioneer is acting as the retailer and must collect sales tax if the auctioneer receives possession of either: 1) a document of title or other indicia of ownership for purposes of delivering the item; or 2) the tangible personal property for purposes of the sale.
On the other hand, if the COMPANY uses the auctioneer only as a “salesperson” and the auctioneer receives neither possession of the item nor any document related to its delivery and transfer of ownership, then the COMPANY will be considered the retailer and its exemption from collecting sales tax on the auctioned item remains intact. The COMPANY would retain physical possession of the item that is auctioned and handle all the paperwork involved with the sale. Under these circumstances, the auctioneer acts as a salesperson only, not as a retailer as discussed above, regardless of whether the COMPANY pays the auctioneer for his or her services. Again, under these circumstances, the transaction would be exempt from sales tax.
Hopefully, this information will help the COMPANY
effectively plan its future fundraisers.
If you have any other questions, please contact us.
For
the Commission,
Marc
B. Johnson
Commissioner
MBJ/KC
01-024