Response May 27, 1994
Request
March 9, 1994
Auditing Division
Utah State Tax
Commission
160 E. 300 South
Salt Lake City, UT
84134
Attention: XXXXX,
Director
Re.: XXXXX
Request for a Ruling:
XXXXX Sales Tax Report
Dear XXXXX:
XXXXX (the “Company”) respectfully
requests that you issue a ruling that the XXXXX Sales Tax Reporting constitutes
an acceptable substitute for vendor generated invoices for purposes of
substantiating purchaser compliance with state sales and use tax laws.
The following presents the Sales Tax
Reporting, explains how sales tax data is gathered and describes how reporting
is made to XXXXX Clients.
If you have any questions or require
additional information, please do not hesitate to contact me at XXXXX. Thank
you for your consideration.
FACTS:
PRODUCT DESCRIPTION
The XXXXX is a procurement card system
that offers companies a new way of purchasing goods and services (the
"XXXXX" or "XXXXX"). The XXXXX is designed to cut costs and
improve control in the area of low-dollar direct business purchases by
consolidating supplier invoices and eliminating requisition form processing.
In brief, XXXXX provides these principal
benefits to XXXXX Clients ("Clients"):
Elimination Of
Paperwork. The Client's
employees contact suppliers directly, eliminating the need to issue and process
requisition and purchase order forms.
Ease Of Payment. Client employees ("XXXXX") use
the XXXXX as the means of payment instead of a company check.
Consolidation Of
Invoices. Instead of
paying hundreds of invoices generated by numerous suppliers, the Client
receives a monthly billing statement from the Company. Each month the Client
pays its XXXXX bill with a single check. As a result, the Client's cost of
writing multiple checks and recording multiple invoices is reduced.
SALES TAX REPORTING
The XXXXX eliminates the business
need for vendors to generate paper invoices, thereby promising significant cost
savings. The promise of savings can be obtained, however, only if the Client
has no other need for paper invoices. Currently the client does have such a
need: it uses paper invoices to determine if it has an obligation to
self-assess sales or use tax with respect to its purchases and to determine
during audit if appropriate sales or use tax was paid to the vendor at the time
of purchase. In order to achieve a “paperless” purchasing environment the
Company has developed XXXXX Sales Tax Reporting to replace paper invoices.
How the Sales
Tax Information is Gathered (“Inputs”). The
Company's software will generate Sales Tax Reporting based on (1 ) information
resident on its data base; and (2) information entered electronically by the
vendor at the point of sale.
The following information resides on the
Company's data base and is part of the Sales Tax Reporting with respect to each
transaction effected with the Purchasing Card:
Vendor name.
Vendor state, city and zip code.
Cardmember’s name.
Cardmember's state, city and zip code.
Cardmember's cost center.
The following information is entered
electronically by the vendor at the point of sale (“POS”) using a “Computer”
submission system or a “Terminal” submission system. It also is part of Sales
Tax Reporting for each transaction.
Total amount of the charge (the billed
amount).
The tax amount.
The processing date.
The transaction date, where the vendor
uses a Computer submission.
When goods are shipped within the USA, the
destination zip code; when they are shipped outside the USA, a code so
indicating (i.e., "99999").
When services are purchased, the zip code
of the location where the services are rendered.
A description of the purchase.
When a vendor submits its XXXXX charges to the Company using a
“Computer” submission, the description of the purchase can be captured in a 160
byte field accommodating free text (the "Computer Open Field").
When a vendor submits its XXXXX charges to the Company using a
“Terminal” submission, the vendor selects up to nine one-digit codes that
correspond to “canned” descriptions resident on the company’s data base. (These
codes and corresponding descriptions are attached as Exhibit ”A.”)
Optional POS
Entries. In addition
to the data listed above, the following fields allow users at the point of sale
to enter additional information as free text. The information is included in
the Sales Tax Reporting.
Cardmember Reference Field.
Computer provides 17 bytes for text.
Terminal provides 9 bytes for text.
Computer Open Field.
160 byte field.
When goods are shipped, at Client's option, part of this field can be
used to capture the destination state
and city.
This option is not available at vendors using a Terminal.
Supplier Reference Field.
Computer and Terminal, 9 bytes.
For order number or other vendor information.
How Sales Tax
Reporting is made to Clients. The
Company will provide the Client with monthly Sales Tax Reporting containing the
data detailed above by one of the following methods, whichever the Client
elects:
“PC Reporting Option.”
Data is transmitted on diskette or via modem.
Data is always provided in "Basic Format" on an encrypted
diskette.
The Basic Format is described in the Presentation Material.
“Tape Reporting Option.”
Data is transmitted on tapes.
An encrypted tape is always provided.
Data is not formatted yet -- it is a “data dump.”
“Paper Reporting Option.”
Data is presented on paper.
Data is not formatted yet -- it is a “data dump.”
Special Issue:
Identifying the taxing jurisdiction when goods are shipped. The Company understands that nearly 99 percent of taxing
jurisdictions can be identified by reference to state, city name and zip code.
The Company will have this data with respect to all “take” transactions and
some “ship” transactions. However, for certain respect to all “take”
transaction and some “ship” transaction the Company will receive only the
destination zip code, and not the state and city name. In such circumstances, Company’s systems
(which will use “AVP Systems” software) may or may not be able to identify the
precise taxing jurisdiction into which the goods were sent.
In cases where zip code alone does not
correspond to a single taxing jurisdiction, the Company understands that, by
using information about its business (other than XXXXX provided data), a Client
may be able to identify the appropriate taxing jurisdiction and satisfy the
state in this regard. However, the Company makes no representation that any
Client will be able to do so.
RULING REQUESTED
The Company requests
your ruling that:
With respect to those transactions where
the Company's system can precisely identify the appropriate taxing jurisdiction
based on the POS data it receives, CPS Sales Tax Reporting constitutes an
acceptable substitute for vendor generated invoices for purposes of
substantiating compliance with state sales and use tax laws.
With respect to those transactions where
the Company's system cannot precisely identify the appropriate taxing
jurisdiction based on the POS data it receives, the data that XXXXX Sales Tax
Reporting does present concerning the transaction is acceptable as accurate
information concerning the transaction; and that the Client may use XXXXX Sales
Tax Reporting and satisfactory evidence other than XXXXX provided data to
establish the correct taxing jurisdiction.
Respectfully
submitted,
XXXXX
Tax Counsel
XXXXX
Re: Advisory Opinion -
Acceptability of “XXXXX Sales Tax Reporting” for Sales and Use Tax Record-keeping
Requirements
Dear XXXXX:
Your request (copy attached) for an
advisory opinion that the XXXXX Sales Tax Reporting constitutes an acceptable
substitute for vendor generated invoices for purposes of substantiating
purchaser compliance with state sales and use tax laws was referred to the
Auditing Division for their analysis.
The division's staff recommendations are
as follows:
1.
Nothing in this opinion is to be construed as relieving the vendor of
any of its tax collection and record-keeping responsibility as outlined in
Administrative Rules R865-19-22S and R865-19-23S (copies attached).
2.
Because of substantial known problems of zip code areas crossing sales
and use tax jurisdictional delineations, the use of zip code alone to determine
and verify tax rate and distribution allocation is frequently unacceptable.
Reports would therefore be required to include normal street address for
delivery point to the purchaser.
3.
The system as described is not a substitute for shipping documentation
in support of any claimed exemption based on interstate shipment.
4.
Nothing in this opinion is to be construed as relieving the purchaser of
responsibility as outlined in R865-21-6U (copy attached). The referenced rule
indicates that a purchaser is not relieved of responsibility for use tax paid
to a vendor unless the purchaser has a receipt for the tax paid including the
Utah sales tax account number of the retailer. Reports would have to include
this information.
5.
After-sale adjustments for discounts, returns, allowances, etc. must be
traceable back to the original related transaction.
6.
Reporting must allow for segregation by description and amount of any
charges claimed as exempt from tax.
7.
Because taxability of certain charges, i.e. freight, depends on point of
title passage, reports must include F.O.B. point or similar information.
8.
Assuming that the above requirements can also be met by the system as
described, such system and reports will be acceptable in lieu of hard copies of
vendor generated invoices with regard to record keeping responsibilities of the
purchaser.
9.
The Tax Commission reserves the right to prospectively revoke this
opinion or prospectively require additional information should the system
records prove to be deficient in any way in providing a practicable audit
trail.
Based upon the facts presented in your
letter, we are in agreement with the Auditing Division's recommendations.
Obviously, if there are deviations from these facts, this opinion may be
negated.
If you do not agree with this
determination, you may appeal to the Tax Commission for a formal hearing. The
results of that hearing would constitute a declaratory judgment and be
appealable to the Utah State Supreme Court. A Notice of Appeal Rights and a
copy of the Utah Taxpayer Bill of Rights are attached.
For The Commission,
Alice Shearer
Commissioner
Dear XXXXX:
This is in reply to your request for
advice regarding the acceptability of “XXXXX Sales Tax Reporting” under
N.J.S.A. 54:32B-16 of the Sales and Use Tax Act. The reporting system will be
sold in New Jersey by the XXXXX.
Briefly stated, the XXXXX purchasing and
tax reporting system is intended to eliminate purchase orders. In addition,
vendors would not necessarily issue paper invoices to their XXXXX customers.
Instead XXXXX clients would receive a monthly consolidated statement from XXXXX
of all XXXXX card purchases.
To address the need to provide sales and use
tax documentation for paperless transactions, participating vendors will be
asked to electronically transmit specific sale-related data to XXXXX. On a
monthly basis, XXXXX will furnish their XXXXX clients with either a print-out
or a tamper-proof computer disk containing all sales related data received by
XXXXX from their vendors, respectively. The data will contain a product
description; the name, state and zip code of the XXXXX card user; and the card
users cost center. The sales tax reporting system will also list the total
amount billed, the tax amount and the tax rate.
In most instances when goods are shipped
by the vendor to the card user, the data can precisely identify the taxing
state or other jurisdiction through the state, city and zip code listing. In
some cases, however, only the zip code may be entered.
N.J.S.A. 54:32B-16 requires vendors to keep sales and purchase
records as the Division may require and make them available for inspection or
examination upon demand.
Pursuant to N.J.A.C. 18:24-2.4, New
Jersey registered vendors may maintain summary sales records which show, at a
minimum, sales location, total receipts and taxable receipts. Summary records
are not deemed adequate evidence of the accuracy of an exemption certificate. N.J.A.C.
l 8:24-2.5(b) In the case of out-of-state sales, the vendor is required to
maintain records for each sale which show the nature of item sold, the
transaction date, the name and address of the purchaser and the method of
delivery to the out-of-state location. N.J.A.C. 18:24-2.6. With respect
to purchase records, New Jersey businesses must maintain records which disclose
the name and addresses of vendors from whom purchases were made, the amounts,
the dates of purchase and the nature of the items purchased. N.J.A.C.
18:24-2.8. The records of a vendor may be found insufficient or inadequate
under N.J.A.C. 18:24-2.15, in which case, the Division may determine and
assess the correct tax due using any information available. N.J.S.A.
54:32B-l 9.
The description of the XXXXX Sales Tax
Reporting System indicates that it will satisfy the stated requirements of N.J.A.C.
18:24-2.4, as recited above if the vendor records and maintains or receives the
same information on a transaction as that communicated to XXXXX. Further, the
minimum stated requirements of N.J.A.C. 18:24-2.6, regarding business
purchase records, are also satisfied. Accordingly, you are advised that
Division auditors will accept records produced under the XXXXX Sales Tax
Reporting System for inspection or examination.
Please note that in those transactions
where the tax situs of a sale can be determined and the tax due is separately
stated on the customer listing, the system is an acceptable substitute for
vendor invoices. If the information on the report is incomplete or the tax is
not separately stated, the customer may continue to be liable for payment of
any applicable sales or use tax.
In those transactions where the tax situs
of the sale cannot be determined, the information contained in the system would
be acceptable proof of the date and amount of the transaction. Other supporting
evidence would be required to establish the correct taxing jurisdiction and tax
application.
In all transactions using the XXXXX Sales
Tax Reporting System, as with traditional vendor generated invoices, if data
about the transaction is incomplete or insufficient, or if tax; collected by
the vendor is not separately stated, then the vendor may be liable for payment
of sales tax on the transaction. Similarly, the purchaser may be liable for
payment of use tax in a use tax transaction. In addition, just as with XXXXX
transactions, the vendor and the purchaser must retain documentation to
substantiate an exemption from tax.
Very truly yours,
XXXXX
Tax Services Specialist
Utah State Tax
Commission
Heber M. Wells
Building
160 East 300 South
Salt Lake City, Utah
84134
Attn: W. Val Oveson,
Chairman
Re: XXXXX - Ruling
Request
Dear Mr. Oveson:
Recently, I sent you copies of rulings we have
received in response to our request for a ruling on the above captioned matter.
We are pleased to now send a ruling we have just received from New Jersey. We
hope that reviewing the rulings of sister states will assist you in your own
ruling process.
Once again, should you have any questions,
I invite you to call me at XXXXX, or XXXXX, our Tax Counsel, at XXXXX. Thank
you for your consideration of our ruling request.
Very truly yours,
XXXXX
Tax Attorney