REQUEST LETTER

Response 1/14/03

02-030

 

NAME

ADDRESS

PHONE

FAX

 

Re: Account No ######

 

COMPANY will soon offer a new product consisting of a purely internet service. COMPANY currently sells, rents, and services computer equipment. COMPANY has salesmen: some of whom may live in your state and others who travel into your state to make sales calls on clients and potential clients. COMPANY also has repair personnel; some of whom may live in your state and others who travel into your state to repair tangible personal property sold by COMPANY. COMPANY currently bills and remits the proper sales tax on its taxable sales and services.

 

COMPANY requests a written opinion on which it can rely should it be audited on whether the internet sales to clients in your state are subject to your sales or use tax. These are the facts.

 

· The connection is made over the internet and is available to anyone. No software is downloaded to the computer of the client in your state. The servers to which the clients connect are located in CITY/STATE.

 

· COMPANY will offer three services for its annual fee; no tangible property is sold:

 

1.      The ability to connect to vendor internet sites through the COMPANY site. The COMPANY site acts only as a portal.

2.      The ability to create a purchase order that remains on the COMPANY website that can be viewed by the COMPANY client and by the chosen vendor to track its progress through the transaction process.

3.      The ability to create a purchase order that can be viewed by several vendors on which the vendors will place bids to fill the purchase order.

 

· The transaction for the sale of goods between the COMPANY client and its chosen vendor is strictly between those two entities and in no way involves COMPANY. COMPANY only activity is the sale of the service to allow the two entities to contact each other.

 

If you have any questions regarding this matter, please call me at PHONE.

 

 

 

RESPONSE LETTER

 

 

January 14, 2003

 

NAME

ADDRESS

 

RE: Private Letter Ruling – Taxation of Internet Service Connecting Customers to Vendors

 

Dear NAME,

 

We have received your request for the Tax Commission to issue a private letter ruling concerning the sale of Internet Services by COMPANY. COMPANY charges its customers an annual fee that entitles a customer to connect to vendor Internet sites through the COMPANY website and to create purchase orders for the benefit of both the customer and vendor.

 

The sale of COMPANY'S Internet services does not require the transfer or downloading of any computer software. For this reason, the Tax Commission does not consider the sale of these services to be a taxable sale of computer software. Nor are the services of a type that are specifically taxable in Utah. Accordingly, the sale of COMPANY Internet services as described in your letter is not subject to Utah’s sales tax.

 

Our ruling is based on your statement that COMPANY is not the seller of any product that its customers purchase from the vendors accessed through the COMPANY website. Should the facts be otherwise, our response might be different. Please contact us if you have any other questions.

 

For the Commission,

 

 

 

Marc B. Johnson

Commissioner

 

 

02-030