01-026

Response: 11/14/01

REQUEST LETTER

Dear Sir/Madam,

This is a request for an official opinion from your Department on whether one of our clients has nexus in your state for sales and use tax purposes and should collect sales tax on the sales of tangible personal property to customers in your state based on the facts set out below.

Following are the details of the nature of the business and the relationship with our client:

§ COMPANY is a telemarketing company who has been operating call centers within the State of Utah for over 12 years.

§ The inbound calls are driven from client-produced Direct Mail, Print, Radio or Television advertising.

§ Representatives from COMPANY answer inbound calls for multiple clients in a shared inbound environment.

§ The product offered or product literature would be shipped via the U.S. Postal Service or other overnight service. The product is always shipped from outside of Utah. The client or another other third party vendors would perform this. COMPANY only takes the order by phone and provides that information back to the client.

§ The calls coming into our Utah facilities would be inbound calls from persons who live outside of the State of Utah. Any telephone calls from any Utah resident would be diverted outside the State of Utah.

§ COMPANY is not owned by any of the companies we contract with for Telemarketing services.

§ The client has no payroll or property within your state.

Based upon the factual situation provided, we are requesting an advisory opinion as to whether the client has nexus in your state for sales and use tax purposes and should be collecting such tax from its customers. Please provide references to the applicable statutory authority, case law, or previous advisory opinions.

If you have any questions, or if additional information is needed, please contact NAME by phone at PHONE, email at E-MAIL, or at ADDRESS.

Thank you for your timely assistance in this matter.

Sincerely,

NAME

PHONE

RESPONSE LETTER

DATE

NAME

COMPANY

ADDRESS

RE: Advisory Opinion – Is a client of COMPANY.

(“COMPANY”) subject to sales tax nexus with Utah?

Dear NAME,

COMPANY is a telemarketing company that operates call centers in Utah. You have inquired whether your client has sales tax nexus with Utah where it contracts with COMPANY to answer inbound calls concerning the sale of their product, take orders, and relay the orders back to it. COMPANY neither produces its client’s advertising nor participates in the shipping of the items sold. In addition, the client has no payroll or property in Utah, and all orders taken by COMPANY are shipped from outside of Utah. Lastly, any of the client’s Utah sales originate at call centers outside of Utah and are shipped into Utah from another state.

You indicate that your client contracts with COMPANY, a Utah company, to answer inbound calls placed by customers outside of Utah, take their orders, then transmit the orders to the client to process outside of Utah. In CASE, #### U.S. 207 (1960), the Supreme Court found that, under slightly different circumstances, a company that hired 10 sales representatives or brokers on a commission basis had sales and use nexus in the state where the brokers were located. However, in that case, the brokers were supplied catalogs, samples, and advertising materials and were actively engaged in soliciting customers from the state where the brokers were located. In your situation, the client does not supply COMPANY with catalogs, samples, or advertising materials to dispense to customers. COMPANY relays such requests back to the client to fill. Nor does COMPANY take orders or solicit clients that are located in the state where nexus is at issue, which in this case is Utah. Because of these differences, we do not consider COMPANY to be actively engaged in Utah as a representative of the client for the purpose of attracting, soliciting, and obtaining Utah customers. Accordingly, it does not appear, under these limited circumstances and under the facts presented, that your client’s relationship with COMPANY is sufficient to impose Utah’s sales and use tax laws on it. However, should your client perform any other services (i.e., marketing, product returns, etc.) or maintain a stock of goods in Utah, it would have responsibility for collecting and paying the sales tax.

Should you have any other questions, please contact us.

For the Commission,

Marc B. Johnson

Commissioner

MBJ/KC

01-026