REQUEST LETTER

 

03-001

 

NAME

ADDRESS

 

Attached is a response we received from a customer that has been nothing but a problem for us when it comes to sales tax. We are registered to collect sales tax in your state as well as in all 46 states and they refuse to pay us the tax to remit to your state for drop shipments we make for them. They are registered in OTHER STATE only and are a mail-order type business.

 

We have always been under the impression that we were responsible (as the selling entity) to collect sales tax for your state.

 

We would like to request an official ruling on this matter to make sure we are doing things correctly.

 

 

Sincerely

NAME

ADDRESS

 

ATTACHMENT

 

NAME

ADDRESS

 

This letter was written to

NAME

ADDRESS

 

You are correct that states can collect taxes from sales which originate within a state and drop ship in the same state. However, the tax is owed by the purchasing entity. Everything we have seen shows that the federal courts protect catalog companies and others without nexus from being required to collect and pay these taxes. This doesn't stop states from trying. The attorneys who specialize in this field say that enough companies without nexus just "go along" with the states, that the states are encouraged to keep pursuing even though the federal laws protect such companies.

 

COMPANY can conduct business in the way it sees fit, as does OTHER COMPANY. As such we will discontinue selling COMPANY products. We still will not pay any taxes for states outside of OTHER STATE.

 

Sincerely

 

NAME

ADDRESS

 

 

RESPONSE LETTER

 

April 14, 2003

 

NAME

ADDRESS

 

RE: Request for Private Letter Ruling Concerning Drop Shipments Made by COMPANY. (“COMPANY”)

 

Dear NAME,

 

We have received your request for a private letter ruling concerning COMPANY drop shipments of tangible personal property into Utah. COMPANY, which has sales and use tax nexus with Utah, sells for resale tangible personal property to OTHER COMPANY (“OTHER COMPANY”), a OTHER STATE company that supposedly does not have sales and use nexus with Utah. OTHER COMPANY does not take physical possession of the tangible personal property at issue. Instead, upon OTHER COMPANY selling the tangible personal property to Utah customers, it directs COMPANY to ship the items from COMPANY facility to the customers. You inquire whether COMPANY should remit sales tax on items sold by , but shipped into Utah by COMPANY.

  Under these circumstances, OTHER COMPANY, not COMPANY, is considered the vendor making the Utah sale. If OTHER COMPANY does not have sales and use nexus with Utah, it is not required to collect and remit Utah sale tax, even if it contracts with COMPANY to ship the item sold into Utah. Because COMPANY sales for resale to OTHER COMPANY are exempt from taxation, COMPANY has no responsibility to collect and remit sales tax on the items it ships into Utah under these circumstances, if it properly documents the exempt sale between OTHER COMPANY and itself.

To document an exempt sale between COMPANY and OTHER COMPANY, you should obtain an exemption certificate from OTHER COMPANY that includes OTHER COMPANY sales tax number. Because OTHER COMPANY is not registered in Utah, it may use its OTHER STATE sales tax number when completing the exemption certificate. As an alternative, you may accept a letter from OTHER COMPANY indicating that its purchases from COMPANY are for resale and informs COMPANY that it has no sales and use tax nexus with Utah. With such documentation, COMPANY would not be liable for any Utah sales and use tax on the items it ships into Utah under the circumstances described.

This opinion addresses only COMPANY sales tax liability for the circumstances described in your request letter.  We are not rendering an opinion as to whether OTHER COMPANY has sales and use nexus with Utah. Should you have any other questions, please contact us.

 

For the Commission,

 

 

 

Marc B. Johnson

Commissioner

 

MBJ/KC

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