REQUEST LETTER

02-009

NAME

ADDRESS

Dear NAME,

Several weeks ago you had a conversation with NAME, who manages the state’s procurement card program. You suggested that we write to request an advisory opinion for the purpose of adding the State Purchasing Card as a direct payment method of funds for the exemption of state sales tax to current State Tax Commission documents: TC-721, Tax Bulletin 9-99, Rules & Regulations R865-19S-42, and any other applicable documents. We request that this apply for state agencies and local governments using purchasing cards.

The Division and DIVISION has for several years managed a Purchasing Card Program for State agencies and political subdivisions under State Contract PD-760. This contract provides VISA cards to employees within a given agency to help in the procurement of small dollar items with a reduction in the amount of time and dollars required to complete the procurement process. The cards are never used for per diem. When the cards are used it is direct agency money that is being spent and there is no personal reimbursement involved. For your information the process is as follows:

· Cards are used for the procurement of necessary goods at appropriate vendors.

At the time of sale the employee is responsible for ensuring that no sales tax is

applied.

· Our issuing bank pays the vendors.

· A monthly statement is sent to the State from the issuing bank and is paid by the Division of Purchasing directly to the bank for the sum of all cardholder transactions.

· This debt is then redistributed to the participant agencies through FiNet.

On occasion there are times when the purchasing card is used that is not possible to remove the tax from the original transaction. With the addition of the purchasing card as a valid form of direct payment it would allow agencies to be rebated on paid sales tax with proper documentation.

Thank you for your consideration of this advisory opinion request. If we can provide any clarification, please contact NAME at PHONE, or myself at PHONE.

Sincerely,

NAME

RESPONSE LETTER

April 18, 2002

NAME

ADDRESS

RE: Advisory Opinion – Utah Governmental Exemption from Sales and Use Tax

Dear NAME,

You have requested that the Tax Commission issue an advisory opinion to address whether sales transactions paid for with the “State Purchasing Card” are exempt from Utah sales and use tax. If such sales are exempt, then the Division of and DIVISION may apply to Tax Commission for refund when sales or use tax has been paid on such transactions. Utah Admin. Rule R865-19S-42(A) (“Rule 42”) provides that: “[s]ales made to the state of Utah . . . are exempt from tax if the purchase is for use in the exercise of an essential governmental function.” From your description of the purchases made with the State Purchasing Card, the purchases qualify.

At issue is whether sales transacted on the State Purchasing Card are “made to the state” and, thus, exempt, or “made to the state employee” and, thus, not exempt. Section (B) of Rule 42 provides that:

A sale is considered made to the state . . . if the purchase is paid for directly by the purchasing state or local entity. If an employee of a state or local entity pays for a purchase with his own funds and is reimbursed by the state or local entity, that sale is not made to the state or local entity and does not qualify for the exemption.

You state that any purchase made on a State Purchasing Card is paid for directly by the State of Utah. In no instance does a state employee pay the bill with his or her own funds, then receive reimbursement for the payment. Under the circumstances you describe, the Commission finds that such purchases meet the requirements of Rule 42 and are exempt from Utah sales and use tax. Accordingly, you may receive a refund of sales tax paid on purchases made with a State Purchasing Card, upon application to the Tax Commission and subject to verification of the appropriate documentation. While a refund is not dependent upon the State Purchasing Card first being designated by the Tax Commission as a tax-exempt purchase program in its bulletins, we will now consider amending our forms and bulletins to specifically include the tax-exempt State Purchasing Card program.

Should you have any other questions, please contact us.

For the Commission,

Marc B. Johnson

Commissioner

MBJ/KC

02-009