94-019
December 17, 1993 Attached Letter
March 9, 1994 Advisory Opinion Request
May 16, 1994 Attached Letter
May 27, 1994 Response
from the Tax Commission
August 9, 1994 Request for Ruling
December 23, 1994 Attached Letter
January 13, 1995 Response from the Tax Commission
June 8, 1995 Response
from the Tax Commission
August 10, 1995 Attached Letter
August 29, 1995 Attached Letter
August 31, 1995 Letter of Clarification
September 18, 1995 Advisory Opinion Request
October 6, 1995 Attached Letter
October 31, 1995 Response from the Tax Commission
November 21, 1995 Attached Letter
November 28, 1995 Requesting Response from Tax Commission
December 8, 1995 Response from the Tax Commission
Re: XXXXX
Dear XXXXX:
Information concerning
a new purchasing card was presented and explained at a meeting held on XXXXX.
You and representatives
of the above company requested a ruling that the proposed statements constitute
an acceptable substitute for vendor generated invoices for purposes of
substantiating purchaser compliance with New York State Sales and Use Tax Laws. Along with the vendor’s name and location,
the statements would capture the card number, the ship to zip code, the nature
of the item or service purchased, the purchase price and the amount of sales
tax collected.
Section 1135 (a) (1)
of the Tax Law states “Every person required to collect tax shall keep records
of every sale or amusement charge or occupancy and of all amounts paid, charged
or due thereon and of the tax payable thereon, in such form as the commissioner
of Taxation and Finance may be regulation require. Such record shall include a true copy of each sales slip,
invoice, receipt, statement, or memorandum upon which subdivision (a) of
section eleven hundred thirty-two requires that the tax be stated separately.”
Sales and Use Tax
Regulation 533.2(a)(2) states in part “...in those instances where the vendor
or user maintains or processes records on an electronic data processing system,
the Department reserves the right to have such records presented on machine
sensible form and the vendor or user must furnish access to such equipment or
records as is necessary for the Department to carry out its standard audit
procedures.”
Sales and Use Tax
Regulation 533.2(b) states:
(2)
“The sales record either must provide sufficient detail to independently
determined the taxable status of each sales and the amount of tax due and
collected thereon or may be substantiated by analysis of supporting
records....”
(3)
The seller must maintain records which substantiate points of delivery
was made at a place other than his place of business. Such documents should include receipts from parcel delivery
services, common carriers, unregulated truckers, the XXXXX, foreign freight
forwarders and logs from company vehicles.
Such documents must be referenced to specific sales transactions.
(4)
...Every vendor accepting an exemption certificate must maintain a
method of associating a sale made for exempt purposes with the certificate on
file....”
We have reviewed and
discussed the information and proposed statement presented at this
meeting. It is our opinion that the
proposed billing statement described at this meeting meets the requirements of
our tax law and the corresponding regulations provided the proposed statement
submitted is the actual statement issued and no changes in the statement format
occurs.
Please feel free to
call me at XXXXX if you have any questions.
XXXXX
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 System
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 Card 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 System 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
(“Cardmembers”) 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 reconciling multiple invoices is reduced.
SALES TAX REPORTING
The XXXXX System
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.
-Cardmembers 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 CPS 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 CPS 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
“ship” transactions 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 CPS
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, XXXXX 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
Dear XXXXX:
The following private
taxpayer ruling is in response to your letter of XXXXX, in which you reset the
department to rule that the documentation provided by the XXXXX Constitutes and
acceptable substitute for vendor generated invoices for purposes of
substantiating purchaser compliance with state sales and use tax laws.
The following is a
restatement of the facts as presented in your letter.
Statement of Facts:
The XXXXX (“XXXXX”) is
a procurement card system that offers companies a new way of purchasing goods
and services. In order to achieve a “paper
less” purchasing environment, XXXXX has developed the XXXXX sales Tax Reporting
System to replace paper invoices.
The XXXXX Sales Tax
Reporting System will provide purchasers with statements which indicate the car
number, the destination zip code, the nature of the item or service purchase
price, and the amount of sales tax collected.
Corporations would not have any individual receipts or invoices for
sales and use tax audits. Only the
reports produced by XXXXX would be available on audit.
The XXXXX process will
work as follows:
1.
Corporations will enroll in the program and distribute the corporate
purchasing cards to appropriate employees.
2.
The cards will be utilized to purchase low cost noncost-of-good items,
3.
The vendor will electronically transmit specific items of sale-related
data to XXXXX, and
4.
XXXXX will furnish the purchasing corporation with a monthly invoice a d
a monthly printout and/or computer disk containing the sales-related data
furnished by the vendor.
Your Position:
With respect to
transactions where the XXXXX Sales Tax Reporting System can precisely identify
the appropriate taxing jurisdiction based on the point of sale data it
receives, XXXXX Sales Tax Reporting constitutes an acceptable substitute for
vendor generated invoices for purposes of substantiating compliance with XXXXX
state sales and use tax laws.
With respect to
transactions where the XXXXX Sales Tax Reporting System cannot precisely
identify the appropriate taxing jurisdiction based on the point of sale data it
receives, the data that XXXXX does present is acceptable as accurate
information regarding the transaction.
A vendor or purchaser may use XXXXX Sales Tax Reporting and other
satisfactory evidence to establish the correct taxing jurisdiction.
Applicable Statutory
Provisions:
XXXXX Revised Statutes
(ARS) §42-114.B provides that every person subject to the taxes administered
pursuant to this article shall keep and preserve suitable records and other
books an accounts necessary to determine the tax for which the person is liable
for the statutory period. These records
shall be open for inspection at any reasonable time by the department or its
authorized agent.
XXXXX §42-1316.A
delineates the documentation required to substantiate the validity of an
exemption from transaction privilege tax.
XXXXX §42-1328
provides that the burden of proving that a sale of tangible personal property
was not a sale at retail shall be upon the vendor, unless the vendor has taken
a certificate signed by and bearing the name and address of the purchaser, a
statement that the property was purchased for resales in the ordinary course of
business, and that he has a valid license, with the number thereof, to sell the
kind of property purchased.
XXXXX Administrative
Code (A.A.C.) R15-5-2214.A provides that the vendor is responsible for
transaction privilege tax and therefore shall provide sufficient documentation
in support of all deductions from the tax base.
XXXXX R15-5-2214.D
provides that documentation, including a certificate other than the
departmental certificate may be accepted by the vendor to establish the right
to a deduction. If the vendor accepts a
form of documentation other than a completed departmental certificate, the
burden of proof remains with the vendor to establish the right to a
deduction. Other documentation
necessary to establish a deduction from the tax base shall contain the
information required by XXXXX §42-1316.A.
Discussion:
XXXXX imposes a
transaction privilege tax which differs from the sales tax imposed by most
states. The XXXXX transaction privilege
tax is imposed on the privilege of conducting business in the State of
XXXXX. This tax is levied on the
seller, not the purchaser. The seller
may pass the burden of the tax on to the purchaser; however, the seller is the
taxpayer and is ultimately liable to XXXXX for the tax.
Transaction privilege
tax is imposed on the vendor ; therefore, on sales which are subject to
transaction privilege tax, the documentation provided by the XXXXX Sales Tax
Reporting System must be sufficient to substantiate vendor compliance with
XXXXX’s transaction privilege tax laws.
The burden of proving
that any transaction was not subject to transaction privilege tax remains on
the vendor unless the purchaser provided the vendor with an exemption
certificate which included the information required by statute as delineated
above. Exemption certificate must be
reclaimed by the vendor in order to prove the sales were exempt from tax.
If a vendor does not
have ______ (*unreadable*) for transaction privilege tax purposes, the sale may
be subject to XXXXX’s use tax. XXXXX’s
use tax is imposed on the purchaser.
However, out of state retailers are required by statute to register with
the state and to collect the use tax from XXXXX purchasers. Out-of-state retailers who make XXXXX sales
and who are registered to report and pay use tax to XXXXX are required to
retain exemption certificates in their files to document sales which are exempt
from the use tax.
Since XXXXX’s use tax
is imposed on the purchaser, for purchases which are subject to XXXXX’s use
tax, the documentation provided by the XXXXX Sales Tax Reporting System must be
sufficient to substantial purchaser compliance with XXXXX’s use tax laws. In the exempt use tax has not been collected
by the vendor and remitted to the state, purchasers must have sufficient
documentation in their records to substantiate that a transaction was exempt
form use tax.
During an audit, an
XXXXX transaction privilege and use tax auditor is required to examine a
taxpayer’s records. The taxpayer’s
records must contain sufficient documentation to trace a transaction from its
original source to its final representation in the number included on its
transaction privilege or use tax returns.
To be acceptable, an
automated data processing system must comply with the following requirements:
1.
A general ledger, with source reference, must be written or printed out
to be reconcilable with transaction, privilege tax reporting periods.
2.
The audit trail must be designed so that the details underlying the
summary accounting, such as exemption certificates, may be identified and made
available to an auditor upon request.
3.
The records must provide the auditor with the ability to trace any
transaction back to its original source or forward to a final total. The system must have the ability to produce
printouts of transactions as necessary to carry out the department’s audit
procedures.
4.
Adequate record retention facilities must be available for strong
applicable supporting documents.
5.
A description of the automated date processing portion of the accounting
system must be available.
Conclusion and Ruling:
On the basis of the information
provided, with respect to those transactions where the XXXXX Sales Tax
Reporting System can precisely identify the appropriate taxing jurisdiction
based on the point of sales data it receives, we rule that the documentation
provided by the XXXXX Sales Tax Reporting System will provide an acceptable
substitute for vendor generated invoices in regard to sales which are subject
to XXXXX’s transaction privilege or use tax.
With respect to those
transactions which are subject to XXXXX’s transaction privilege or use tax,
where the XXXXX Sales Tax Reporting System cannot precisely identify the
appropriate taxing jurisdiction based on the point of sales dat it receives, we
rule that the documentation provided by the XXXXX Sales Tax Reporting System will
provide accurate information concerning the transaction and that the purchaser
may use XXXXX Sales Tax Reporting and other satisfactory evidence to establish
the correct taxing jurisdiction.
However, the
documentation provided by the XXXXX Sales Tax Reporting System will not provide
an acceptable substitute for sufficient documentation in regard to sales which
are exempt from XXXXX’s transactions privilege tax. In addition into the documentation provided by the XXXXX Sales
Tax Reporting System, vendors must retain exemption certificates which include
all the information required by XXXXX §§42-1316 or 42-1328 in order to
establish the exempt status of those sales.
For transactions which
are exempt from the use tax, in addition to the documentation provided by the
XXXXX Sales Tax Reporting System, retailers who are registered to collect and
remit use tax to the state must also retain exemption certificates which
include all the information required by XXXXX §§42-1316 or 42-1328 in order to
establish the exempt status of those sales.
If XXXXX purchasers make purchases which are exempt from use tax from
retailers who are not registered to collect and remit use ta to the state, the
purchasers must have sufficient documentation in their records to substantiate that
the transaction was exempt from XXXXX’s use tax.
The conclusion in this
private taxpayer ruling does not extend beyond the facts as presented in the
letter and related documents dated XXXXX in this request for a private taxpayer
ruling.
This response is a
private taxpayer ruling and the determination herein is based solely on the
facts provided in your request. The
determination in this taxpayer ruling is the present position of the department
and is valid for a period of four years form date of issuance except as set out
herein.
This determination is
subject to change should the facts prove to be different on audit. If it is determined that undisclosed facts
were substantial or material to the department’s making o of an accurate
determination, this taxpayer ruling shall by null and void. Further, the determination is subject to
future change depending on changes in statutes, administrative rules, case law
or notification of a different department position.
If I can be of further
assistance, please do not hesitate to contact me at XXXXX
Sincerely,
XXXXX
Tax Analyst
Tax Research &
Analysis Section
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 System 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 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
Utah State Tax
Commission
Heber M. Wells
Building
160 East 300 South
Salt Lake City, UT
84134
Re: Advisory Opinion -- Acceptability of “XXXXX
Sales Tax Reporting” for Sales/Use Tax Record Keeping Requirements.
Dear XXXXX:
Thank you for your
recent letter responding to our request for an advisory opinion that “XXXXX
Sales Tax Reporting” constitutes and acceptable substitute for vendor generated
invoices for purposes of substantiating purchaser compliance with state sales
and use tax laws.
As XXXXX, our counsel
with the law firm of XXXXX, discussed with XXXXX, we are concerned that you may
have some misconceptions about the XXXXX purchasing Card (“XXXXX”) and about
the nature of the ruling we requested.
We would like to take this opportunity to clarify your understanding of
both.
Normal street
address for delivery point to purchaser. Your letter
indicates that you are concerned about identifying the appropriate taxing
jurisdiction in transactions involving the shipment of goods. Because zip code often, but do not always,
identify a single taxing jurisdiction, you indicate that “Reports would
therefore be required to include normal street address for delivery point to
the purchaser.”
In our opinion, it is
not necessary to require that XXXXX Sales Tax Reporting contain the entire
“ship to address. For the reasons that
follow, the state’s interest in identifying the appropriate taxing jurisdiction
(state, city, county) is fully protected even when the “normal street address”
is not captured and reported.
As we explained in our
original request, about 70 percent of zip codes correspond to a single taxing
jurisdiction. In such cases, the street address is not required to identify the
jurisdiction to which tax is owed. or example, the zip code 1028"
corresponds to only one taxing jurisdiction -- New York City. Thus, in such a
situation, when the vendor indicates only the “ship to zip code”, the precise taxing
jurisdiction is readily established and the street address provides no
incremental value.
Additionally, 99
percent of taxing jurisdictions can be identified by reference to state, city name
and zip code. Thus, in such a situation, when the vendor indicates the “ship
to” state, city and zip code, the precise taxing jurisdiction is readily
established and the street address provides no incremental value.
Accordingly, with
respect to those transactions described above where the appropriate taxing
jurisdiction can be identified based on the point of sale data XXXXX receives
(whether that be based on state, city and zip code, or zip code alone), we
request that you rule that:
“XXXXX Sales Tax
Reporting constitutes an acceptable substitute for vendor generated invoices
for purposes of substantiating compliance with state sales and use tax laws.”
Although the same
ruling will not apply in those instances where more data is needed in order to
identify the applicable taxing jurisdiction, we would like the state to
acknowledge that a taxpayer may be able to use information about its business
(other than XXXXX provided data) to identify the appropriate taxing
jurisdiction.
For example, a company
using the XXXXX Card can implement a policy requiring that Cardmembers ship
purchases only to their business billing address. In such cases, the
appropriate taxing jurisdiction is known -- it is the jurisdiction in which the
Cardmembers billing address is located. This logic essentially checks itself
“since the vendor provided information about ship to zip code” should be
identical to the Cardmember's business zip code. Thus, there is no need to
identify the normal street address” to which goods are shipped.
Accordingly, with
respect to those transactions where the appropriate taxing jurisdiction cannot
be identified based on the point of sale data XXXXX receives, we request that
you rule that:
“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.”
Substitute for
shipping documentation in support of interstate shipment.
XXXXX Sales Tax Reporting is substantially similar to vendor generated
documentation: based on vendor provided data, it records the destination of a
shipment and can even provide information about FOB terms (see below). Goods in foreign commerce can also be
identified: vendors are instructed to enter a code -- like 99999 -- in the
“ship to” zip- code to indicate that the shipment is going outside the United
States.
Given all this, XXXXX
Sales Tax Reporting is as reliable as a vendor generated shipping documentation
and should be equally acceptable as support of an interstate shipment.
Utah sales tax
account number. You indicated that XXXXX Sales Tax Reporting
must include the vendor’s Utah sales tax account number. This number is important since it confirms
to the purchaser and to an auditor that a vendor that collects Utah use tax is
in fact authorized to do so.
The XXXXX, XXXXX
System cannot capture Utah’s sales tax account number. However, we have addressed a similar issue
with the state of XXXXX and propose to you the same solution that XXXXX has
accepted.
We propose including
in our “User’s Tax Guide” (a booklet for corporate XXXXX Clients) a state law
section for Utah taxpayers. This section
would recommend that corporations required to file sales/use tax returns in
Utah solicit the Utah sales tax account number numbers from vendors in order to
confirm that the vendor is properly required to collected tax for Utah. The section could recommend that such a
solicitation be conducted at the same time the corporations solicit Taxpayer
Identification Numbers from vendors for income tax purposes. We believe that this solution preserves that
State’s interest by meeting the spirit of the regulations and even educates
taxpayers about Utah’s requirements.
After-sale
adjustments for discounts, returns and other allowances.
Such adjustments will be traceable back to the original
transaction. Vendors are instructed to
use the same “supplier reference number” for a refund or credit transaction
that was used in original purchase transaction. In this way, the “supplier reference number” ties the original
purchase and subsequent credit transaction together.
Just as today, if the taxpayer
cannot identify the original purchase transaction and the tax paid with respect
thereto, the state may deny the credit for tax paid with respect to the return
transaction.
Segregation by
description and amount of tax exempt charges.
In your letter
you state that our reporting must allow for segregation by description and
amount of any charges exempt from tax.
We are not clear what you mean by this statement.
Our Sales Tax
Reporting documents sales/use tax data on a transaction by transaction basis,
providing a description of the transaction, but not capturing traditional “line
item detail.” Users are instructed to
purchase taxable and exempt purchases separately. If this instruction is followed, all XXXXX transactions reported
by Sales Tax Reporting will be either fully taxable or not taxable at all. Of course, the record of each transaction
will contain a description of what was purchased (as long as, just as today,,
the vendor provides one). And, just as
today, any exemption not established by the description of the item itself must
be established by documentary evidence.
Therefore, our Sales Tax Reporting is substantially similar to the
traditional paper-invoice system.
Accordingly, we believe that the Sales Tax Reporting system should
easily satisfy any concerns you have about tax exempt transactions.
F.O.B. or
Similar Information. Information about title passage can be
captured at the point of sale by utilizing the 160 character field (the “Open
Field”). Additionally, a master
agreement between the purchaser and vendor can set delivery (including FOB)
terms for all XXXXX transactions. Then
XXXXX transactions would simply be governed by the terms of the agreement. Thus, our Sales Tax Reporting an operate in
a way substantially similar to the way that the traditional “paper-invoice”
system operates.
We would be happy to
include in our “Users Guide” a reminder that the taxability of certain charges
may depend on where title passes and that capturing FOB and other terms in the
open fields may be key to establishing correct taxation.
Ruling Requested.
Accordingly, we respectfully request that, based on our representations
about the XXXXX, you rule that:
-With respect to those transactions where
our system can precisely identify the appropriate taxing jurisdiction based on
the POS data it receives, PC Sales Tax Reporting constitutes an acceptable
substitutes for vendor generated invoices for purposes of substantiating
compliance with state sales and use tax laws.
-With respect to those transactions where
our system cannot precisely identify the appropriate taxing jurisdiction based
on the POS data it receives, the dat 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.
XXXXX
Tax Counsel
Re: Technical Assistance Advisement
94A-57R Sales and Use Tax - Record
Retention
Sections 212.06, 212.07, 212.13, 212.15,
213.35, F.S.
Rule 12A-1.093, F.A.C.
Dear XXXXX:
This amended Technical
Assistance Advisement is in response to your request for clarification on the
third paragraph of the determination issued in Technical Assistance Advisement
94A-57, dated XXXXX. The original
petition, received XXXXX, requested the Department's issuance of a Technical
Assistance Advisement concerning the above referenced matter. This amended
response constitutes a Technical Assistance Advisement under Chapter 12-11,
XXXXX Administrative Code, issued to you under the authority of § 213.22, F.S.,
and replaces Technical Assistance Advisement 94A-57, dated XXXXX.
DISCUSSION OF FACTS
Your company has
developed a corporate purchasing system whereby your clients may eliminate
paperwork and consolidate invoices. This system allows your client to use a
corporate purchasing card to make low-dollar direct business purchases. The
system consolidates supplier invoices on a monthly statement which will capture
the vendor name and location, including state, city, and zip code, the card
number, the amount of the charge, the amount of sales tax collected, the
processing date, and the nature of the item or service purchased.
REQUESTED ADVISEMENT
Your petition requests
that the Department of Revenue consider whether the statements generated by the
corporate purchasing system constitute an acceptable substitute for vendor
generated invoices, for purposes of substantiating purchaser compliance with
state sales and use tax laws, when the appropriate taxing jurisdiction, based
on the point of sale, can be precisely identified. You have also requested that
the Department of Revenue consider if, when the appropriate taxing jurisdiction
can not be precisely identified, the statements generated by the system are
acceptable as accurate information concerning the transaction. In these cases,
the statement would confirm the taxable transaction and your client would be responsible
for providing additional information to document that the appropriate rate of
tax was paid for the particular taxing jurisdiction.
DISCUSSION AND
ANALYSIS OF LAW
Section 212.13(2),
F.S., provides, in pertinent part:
“(2) Each dealer, as defined in this
chapter, shall secure, maintain, and keep as long as required by s. 213.35 a
complete record of tangible personal property or services received, used, sold
at retail, distributed or stored, leased or rented by said dealer, together
with invoices, bills of lading, gross receipts from such sales, and other
pertinent records and papers as may be required by the department for the
reasonable administration of this chapter....”
Section 213.35, F.S.,
provides:
“Each person required by law to perform
any act in the administration of any tax enumerated in s. 72.011 shall keep
suitable books and records relating to that tax, such as invoices, bills of
lading, and other pertinent records and papers, and shall preserve such books
and records until expiration of the time within which the department may make
an assessment with respect to that tax pursuant to s. 95.091(3).”
Rule 12A-1.093(1),
(2), and (3), F.A.C., provides:
“(1) The Department of Revenue has the
power to prescribe the records to be kept by all persons subject to the taxes
imposed by Chapter 212, F.S.
“(2) Each dealer defined in Chapter 212,
F.S., each licensed wholesaler, and any other person subject to the tax imposed
by Chapter 212, F.S., shall keep and preserve a complete record of all
transactions, together with invoices, bills of lading, gross receipts from
sales, RESALE CERTIFICATES, CONSUMER EXEMPTION CERTIFICATES and other pertinent
records and papers as may be required by the Department of Revenue for the
reasonable administration of Chapter 212, F. S., and such books of account as
may be necessary to determine the amount of tax due thereunder.
“(3) All such books, invoices and other
records shall be open for inspection by the Department of Revenue at all
reasonable hours at the dealer's store, sales office, warehouse or place of
business located in this state. Any dealer who maintains such books and records
at a point outside this state shall make such books and records available for
inspection by the Department of Revenue where the general records are regularly
kept.”
Section 212.15(1),
F.S. provides, in pertinent part:
“(1) The taxes imposed by this chapter
shall...become state funds at the moment of collection and shall for each month
be due to the department on the first day of the succeeding month and be
delinquent on the 21st day of such month....”
Section 212.07, F.S.,
provides, in pertinent part:
“(2) ...[T]he amount of the tax shall be
separately stated as XXXXX tax on any charge ticket, sales slip, invoice, or
other tangible evidence of sale....”
“(9) Any person who has purchased at
retail, used, consumed, distributed, or stored for use or consumption in this
state tangible personal property, admissions, communication or other services
taxable under this part, or leased tangible personal property, or who has
leased, occupied, or used or was entitled to use any real property, space or
spaces in parking lots or garages for motor vehicles, docking or storage space
or spaces for boats in boat docks or marinas, and cannot prove that the tax
levied by this chapter has been paid to his vendor, lessor, or other person is
directly liable to the state for any tax, interest, or penalty due on any such
taxable transactions.”
Section 212.06(1),
F.S., provides, in pertinent part:
“(l)(a)...The full amount of the tax on a
credit sale, installment sale, or sale made on any kind of deferred payment
plan shall be due at the moment of the transaction in the same manner as on a
cash sale.”
CONCLUSIONS OF LAW
The records prescribed
by the Department of Revenue include invoices, bills of lading, sales receipts,
and other records or papers showing that the proper tax was collected on all
transactions. The information which is normally captured on these documents
includes vendor name and location, the items purchased, the shipping location,
and the appropriate tax rate and the amount of XXXXX tax collected.
To be considered an
acceptable substitute for vendor generated invoices, the statements generated
by your corporate purchasing card system must capture all information which is
normally captured on a vendor invoice or other sales document. This information
must include the shipping location so that the appropriate taxing jurisdiction
may be identified. Your purchasing card system currently captures the vendor
name and location, including state, city, and zip code, the card number, the
amount of the charge, the amount of sales tax collected, the processing date,
the nature of the item or service purchased, and the ship-to zip code.
The information
captured by your purchasing card system will identify a state taxing
jurisdiction. However, the ship-to zip code alone may not properly identify the
appropriate taxing jurisdiction for purposes of determining any local option
taxes which may be due. Therefore, you may wish to modify your purchasing card
system to capture the entire ship-to address so that the appropriate taxing
jurisdiction may be precisely identified. With this information, the purchasing
card statement will be considered an acceptable substitute for vendor generated
invoices .
If your purchasing
card client(s) makes XXXXX taxable transactions and XXXXX Sales Tax is not
collected from the vendor, your client(s) must pay XXXXX Use Tax directly to
the State of XXXXX. Sales or Use Tax is due at the moment of the transaction on
all cash sales, credit sales, installment sales, or sales made on any kind of
deferred payment plan. In addition, this tax is due on the first day of the
month following the month of the transaction. If the purchasing card statement
is issued on a cycle other than a calendar month, your client(s) must be aware
that tax may be due prior to receipt of the purchasing card statement. Also, if
the statement does not identify the transaction date, your client(s) must be
aware that the processing date may be in a month other than the transaction
date. In these cases, your client(s) may need documentation of the transaction
prior to receipt of the purchasing card statement, or documentation to
substantiate the actual transaction date, to ensure that XXXXX Use Tax is paid
in a timely manner.
DETERMINATION
Where the appropriate
taxing jurisdiction can be precisely identified on the statement generated by
your purchasing card system, the statement will be considered an acceptable
substitute for vendor generated invoices.
Additionally, when the
appropriate taxing jurisdiction can not be precisely identified, your
purchasing card system statements will be considered as reliable information
concerning the transaction, but will not be considered an acceptable substitute
for vendor generated invoices. In these instances, your client must provide
additional documentation to substantiate that the proper tax was collected or
remitted.
Furthermore, where
your client is responsible for XXXXX Use Tax, the statement generated by the
purchasing card system will be considered acceptable as accurate information
concerning the transaction. However, just as a taxpayer cannot extend the due
date or payment of XXXXX Use Tax based on receipt of a vendor generated
invoice, your client will not be permitted to extend the due date or payment of
XXXXX Use Tax based on receipt of the purchasing card system statement or the
processing date of the transaction. In addition, just as receipt of a vendor
generated invoice after the date XXXXX Use Tax is due and payable is not
considered reasonable cause for compromise of late payment penalties when Use
Tax is paid on receipt of such invoice, receipt of the statement generated by
the purchasing card system after the date XXXXX Use Tax is due and payable will
not be considered reasonable cause for compromise of late payment penalties
when Use Tax is paid upon receipt of the statement.
This response
constitutes a Technical Assistance Advisement under s. 213.22, F.S., which is
binding on the department only under the facts and circumstances described in
the request for this advice as specified in s. 213.22, F.S. Our response is
predicated on those facts and the specific situation summarized above. You are
advised that subsequent statutory or administrative rule changes or judicial
interpretations of the statutes or rules upon which this advice is based may
subject similar future transactions to a different treatment than expressed in
this response.
You are further
advised that this response and your request are public records under Chapter
119, F.S., which are subject to disclosure to the public under the conditions
of s. 213.22, F.S. Your name, address, and any other details which might lead
to identification of the taxpayer must be deleted by the Department before
disclosure. In an effort to protect the confidentiality of such information, we
request you notify the undersigned in writing within 15 days of any deletions
you wish made to the request or the response.
Sincerely,
XXXXX
Tax Law Specialist
Re: Advisory Opinion - Acceptability of “XXXXX
Sales tax Reporting” for Sales and Use Tax Record-keeping Requirements
Dear XXXXX;
You resubmitted a
request (copy attached) for an advisory opinion that the XXXXX System Sales Tax
Reporting constitutes an acceptable substitute for vendor generated invoices
for purposes of substantiating purchaser compliance with state sales and use
tax laws.
Our research indicates
as follows:
1.
While we are not sure of the basis for your claim that “99 percent of
taxing jurisdictions can be identified by reference to state, city name, and
zip code,” we do know that this is clearly not the case in Utah. For example, the zip code XXXXX includes
portions of South Salt Lake and West Valley City. Zip code XXXXX includes portions of Salt Lake City, South Salt
Lake, and Salt Lake County. Zip code
XXXXX includes portions of Murray City and Salt Lake County. Each of these locations have their own
taxing authority for sales tax purposes, but the addresses are generally known
as “Salt Lake City”. These are only
examples of many such situations in heavily concentrated business districts in
Utah. As indicated in the previous
opinion, to be acceptable, reports would be required to include normal street
address for delivery point to the purchaser.
2.
Administrative Rule R865-21U-6 states:
“When property is purchased from a
registered retailer, the purchaser is not relieved from the tax liability
unless a receipt is obtained from such retailer. This receipt need not be in any particular form but must show the
name and registration number of the retailer, the name of the purchaser, the
date of the sale, description of the property or reference to the sales
invoice, the purchase price, and amount of tax. A sales invoice containing the above information, together with
evidence of payment of such invoice, will constitute a receipt Payment of the
tax to a registered retailer under these conditions relieves the purchaser of
any further liability.”
A separate list of
vendor account numbers does not fulfill this requirement.
3.
The use of the name “supplier reference number” for both the original
transaction and any subsequent adjustments for discount, returns allowance,
etc. which results in the required audit trail is acceptable.
4.
By using the terminology “segregation by description and amount of tax
exempt charges,” we are attempting to indicate the requirement that in order
for any nontaxable item to be treated as such, it must be separately stated
(normally on an invoice). For example,
actual shipping charges on F.O.B. point of origin sales would be exempt from
tax, but only if containing taxable charges would have to be taxed.
The XXXXX system will
be acceptable in lieu of hard copies of vendor generated invoices with regard
to record keeping responsibilities of the purchaser assuming the requirements
in the previous advisory opinion and the clarifications stated above are met.
This opinion is based
upon the facts presented in your letter.
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 judgement and be appealable to the Utah State
Supreme Court. A Notice of Appeal
Rights and a copy of the Utah Taxpayer Bill of Rights area attached.
For the Commission,
Alice Shearer
Commissioner
Re: Advisory Opinion - Acceptability of XXXXX
Sales Tax Reporting for Sales and Use Tax Record Keeping Requirements
Dear XXXXX:
You asked the Commission
to reconsider your request for an advisory opinion that the XXXXX System Sales
Tax Reporting constitutes an acceptable substitute for vendor generated
invoices to substantiate purchaser compliance with state sales and use tax laws
The Commission
recognizes that electronic data interchange (EDI) technology is important to
the future of every business Commissioner Oveson is working with the Federation
of Tax Administrators and companies like yours to design standard data formats
and access procedures to satisfy tax record keeping requirements without
imposing unnecessary impediments to EDI. We invite you to participate In this
process through the XXXXX.
Once the national
standards are refined to collect essential tax data, we expect to our procedures
to accommodate those standards In the meantime. we have reevaluated your
requests for an advisory opinion under current Utah Law and Tax Commission
procedures We find as follows
1.
A delivery address is required to property identify the appropriate taxing
jurisdiction.
Utah zip codes do not
necessarily coincide with taxing jurisdictions. For example, the zip code XXXXX includes portions of South Salt
Lake City and West Valley City. The zip
code XXXXX includes portions of Salt Lake City, South Salt Lake City and
unincorporated Salt Lake County. The
zip code XXXXX includes portions of Salt Lake County and Murray City. These are a few examples of many such
situations arising in the heavily concentrated business districts in Utah. They
illustrate that zip codes alone are an unreliable indication of taxing
jurisdiction.
A zip code accompanied
by a city name is no more reliable than a zip code alone. It is common for instance to use “Salt Lake
City” in addresses in or around the Salt Lake City area without regard to
whether the address actually falls within the boundaries of Salt Lake City
proper.
If a company using the
XXXXX implements a policy requiring that all card purchases be shipped to the
mailing address that policy will satisfy audit requirements so long as
adherence to the policy is properly documented.
2.
A claimed exemption based on interstate shipment must be supported by
evidence of actual out-of-state delivery.
XXXXX Sales Tax
Reporting alone does not sufficiently support a claim for exemption based on
interstate shipment. However, a report indicating a shipping destination
outside of Utah accompanied by evidence of actual out-of-state delivery such as
a receipt from the carrier will satisfy the record keeping requirements.
3.
A purchaser must have evidence that the use tax was collected by the
vendor or remain liable for the tax A receipt for the tax which includes the
vendor's sales tax account number is prime facie evidence that the vendor
collected the use tax. If the Sales Tax
Report does not include the vendor's Utah sales tax account number, the
purchaser must solicit the number and record it in a way that identifies the
number with the transaction. Such
action will relieve the purchaser of further responsibility to pay the tax but
it does not relieve the vendor of record keeping requirements
4.
The use of the same “supplier reference number”' for both the original
transaction and any subsequent adjustments for discounts returns, allowance etc
which results in the required audit trail is acceptable to support a claim for
credit for tax paid.
5.
In order for nontaxable items to be treated as such, they must be
separately identified in the Sales Report record For example, actual shipping
charges on FOB point of origin sales would be exempt from tax but only if
separately stated. Unless nontaxable transactions can be clearly identified the
total charge is subject to tax.
XXXXX Sales Tax
Reporting is acceptable in lieu of hard copies of vendor generated invoices to
the extent that it fulfills the record keeping requirements set forth in this
opinion and our previous opinion. If XXXXX Sales Tax Reporting records do not
meet these requirements the client must use other documents or evidence to
support the record.
This opinion is based
upon the facts presented in your letter.
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
XXXXX, Tax Attorney
Dear XXXXX;
This letter is sent to
confirm what XXXXX. (hereinafter,
XXXXX) has written and personally explained to the XXXXX Sales & Use Tax
Division regarding the company’s “XXXXX Card Sales Tax Reporting” and to notify
XXXXX that, as a matter of policy, the report is acceptable as a reliable
document alternative to the receipt and maintenance of vendor generated
invoices for XXXXX use tax audit purposes.
XXXXX Sales Tax Reporting
As described, data on
each purchase card transaction will be accumulated and sent to each card
holder. Details about the vendor
(reference #, name, location and zip code) about the card holder (name, account
number, location and cost center); transaction (date, total charged, tax
amount, description); as well as computer calculated data (base amount of the
transaction, the rate of tax collected) will be furnished to the card
holder. Depending on whether the card
holder picks up or is shipped an item, the system, through software purchased
by XXXXX, will also identify the maximum rate of taxation due on a taxable
transaction.
The card holder will
be sent a monthly report either on a paper medium or through a PC option. The PC option can be via diskette or
modem. Regardless of the format, a
summary of all activity is furnished with the individual transaction
details. Depending on the nature of the
equipment used by the vendor to record the transaction, the description of the
purchase may be limited to a nine code reference (terminal input) or more extensive
(up to 160 bytes of computer inserted date).
Advice on
Acceptability
Based on the written
and verbal representations and the ability of XXXXX to produce records that
comport with the sample documentation provided, XXXXX Sales and use Tax auditors
will be advised to accept the XXXXX Sales Tax Reporting as an adequate
replacement for vendor generated invoices.
Card holders must understand that the XXXXX Revised Code presumes tax
applies unless the contrary is established and theat the card holder and its
suppliers must comply with XXXXX’ directions on handling taxable and nontaxable
transactions on separate billings.
Moreover, the potential for very generic description can be readily
obtained, especially where a cost center indicates a usage of mixed taxable
consequence.
Conclusion
It is my hope that the
essence of your system has been adequately set forth. To the extent that it has and that XXXXX, its member card holders
and their suppliers comport with the intended operation of the system, the
documentation is an acceptable replacement to the traditional vendor generated
invoices. Because of the rather limited
number of description codes, that can be terminally inputted, it may be
necessary to obtain supplemental information for some transactions where the
description is not clear. The
subsequent recapture of any information available at the of sale by the card
holder-consumer is as valid for your system as it is now when invoice
descriptions are generic. If the nature
of an item or its use appears unclear, it may also be wise to obtain and keep
back up details at the time of purchase rather than try to secure it later.
I trust that this
reply has adequately addressed your concerns.
If not, and further attention to this matter is necessary, please let me
know.
Sincerely,
XXXXX
Sales & Use Tax
Division
XXXXX
Dear XXXXX:
Thank you for your
letter requesting a ruling on the a new product, XXXXX (“XXXXX”), that XXXXX
(the “Company”) is in the process of introducing. I have restated your facts
below followed by my response:
FACTS: PRODUCT
DESCRIPTION
XXXXX is a procurement
card system that offers companies a new way of purchasing goods and services.
XXXXX is designed to reduce costs and improve controls in the area of
low-dollar, indirect business purchases by eliminating requisition form
processing and consolidating payments to suppliers.
In brief, XXXXX
provides these principal benefits to XXXXX (“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 (“Cardmembers”) 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 reconciling 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 full savings can only be realized 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 is designed to reside on the Company's data base and be part of the
Sales Tax Reporting with respect to each transaction effected with the
Purchasing Card:
· Vendor name.
· Vendor state and zip code.
· Cardmember's name.
· Cardmember's city, state 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.
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 more detailed “ship to” information.
-
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”-- Purchase Power.
- Data is transmitted on diskette or via
modem.
- Data will be provided in “Standard
Format” on a tamper proof diskette.
- The Standard Format is described in the
Presentation Material.
· “Paper Reporting Option.”
- Data is presented on paper.
- Data is provided in “Standard Format.”
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 most “take” transactions and
some "ship" transactions. However, for certain transactions the
Company will have access to only zip code information (no 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 in
which the purchaser accepted the goods (in a “take”) or into which the goods
were sent (in a “send”).
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, XXXXX 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 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.
RESPONSE
Based on the
information provided the system described above will meet the data reporting
requirements of this office, if data required to be entered electronically by
the vendor at the point of sale is actually entered. Just as with traditional
paper invoices, of major importance. to auditors is the item description of
items sold; therefore it is imperative that this field be completed by the
vendor for each different item sold or that the “canned description” entered is
sufficient. To this end, we would appreciate receiving any documents (including
brochures, training materials, etc.,) provided to the Client by XXXXX, that
explain the requirements/necessity of completing all pertinent fields. Just as
with traditional paper invoices, if an item description is omitted and cannot
be ascertained by the auditor, the burden of proof will fall on your client
(purchaser and/or vendor) to show that the item is not taxable.
Additionally, we would
be interested in possibly attending any training seminars that you may have for
clients in XXXXX in the near future.
This opinion is based
on the facts presented. Other facts though similar may provide a different
result.
You may call me
toll-free at XXXXX, XXXXX The direct line is XXXXX. You may also write to
XXXXX.
Sincerely,
XXXXX
Tax Administration
Division
Mr, Val Oveson
Chairman
Utah Tax Commission
Dear Val:
Following are communiques
relating to the phone message I left for you earlier this week, I thought these
materials might help to clarify my lengthy message.
I will be out of the
office next week, but will try and reach you from XXXXX. Otherwise, I will be
back in XXXXX beginning XXXXX.
Thank you, in advance,
for your guidance in this matter. Your insights and experience in this area are
greatly appreciated.
Sincerely,
XXXXX
Director
State Government
Affairs
Mr. Val Oveson
Utah State Tax Commission
160 East 300 South
Salt Lake City, Utah
84134
Subject: XXXXX
ADVISORY OPINION
Dear Val:
Per our conversation,
enclosed please find copies of favorable final rulings or draft rulings with
respect to the above-captioned subject from the following states: XXXXX.
As you can see from
these rulings -- and particularly from the language used by XXXXX -- all of the
states are concerned about adequate descriptions of the items purchased. However,
all of these rulings explicitly recognize that, just as with a vendor generated
invoice today, if the description is inadequate, the burden of proof is
squarely on the taxpayer to establish entitlement to an exclusion or exemption.
Although this is also the case in the other state rulings, the use of explicit
language in a ruling can make this eminently clear to any corporate purchasing
card client seeking to rely on such ruling.
As you may recall, the
XXXXX Sales Tax Reports do contain room
for the description of the items purchased. How the description is produced
depends on the type of point of sale technology being utilized by the vendor (a
free-text field in a PC environment or a pre-selected code indicating a given
commodity if a terminal is used).
We also spoke
previously about your concern that the vendor sales tax identification number
is not on our Reports. You have indicated that without this information we do
not have a “valid invoice.” What is confusing about this conclusion is that our
experience to date has been that vendor generated invoices do not contain this
information today. It thus appears that data coming through our system is being
held to a different standard than that of a vendor generated invoice. What is
also unclear, assuming these are not adequate as invoices, are the
ramifications of not having “good” invoices.
The last point of our
conversation concerned the fact that our Reports will only have the zip code of
the sale. We understand that this creates an issue because it may not be
possible to precisely allocate tax revenues to the local taxing jurisdictions.
We understand that where this happens today, the revenues are split according
to population. You have indicated in your letter ruling that, to be acceptable,
our Reports would need the actual street address. Again, this conclusion is
confusing given that you have indicated that, if tax is shown, you would not
assess tax on the same taxpayer again. Given that tax will not be assessed
again, it appears that the Reports are acceptable (to prove tax was paid). What
you have explained is that an incomplete address (i.e., only the zip code)
raises a practical issue for you (how to split tax revenues) rather than a pure
legal issue regarding liability of the taxpayer under audit.
In any case, we would
like to emphasize the practical solutions that can aid in a more precise
determination of the jurisdiction due the tax. Since items purchased on the
XXXXX are most likely to be ordered by phone and shipped to the Cardmember's
billing address, we would suggest that a taxpayer under audit would be able to
prove the precise location of all shipments because it should coincide with
their office location.
I hope that the above
discussion and the attached rulings are helpful. I would be happy to discuss
this further at your convenience.
Very truly yours,
XXXXX
Tax Counsel
Attention: XXXXX, Tax
Attorney
Dear XXXXX:
We have further
reviewed the information you submitted which we discussed at our conference on
XXXXX in connection with the proposed corporate procurement card. You are
requesting the following rulings:
1.
With respect to those transactions where your Company's system can
precisely identify the appropriate taxing jurisdiction based on the point-of-sale
(PQS) data it receives, XXXXX Sales Tax Reporting constitutes an acceptable
substitute for vendor generated invoices for purposes of substantiating
compliance with state sales and use tax laws.
2.
With respect to those transactions where your Company's system cannot
precisely identify the appropriate taxing jurisdiction based on the data it
receives, the data that XXXXX Sales Tax Reporting presents 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.
FACTS
Your firm is currently
marketing a new XXXXX (XXXXX) which allows firms to purchase property from
various vendors without receiving a
vendor generated invoice. Firms using the card receive a periodic printout, or
XXXXX Sales Tax Report, detailing
transactions handled through the use of the card. Your firm's data base will
contain the vendor’s name, vendor’s state and zip code, card member's name,
cardmember's city, state and zip code, and cardmember’s cost center. This
information will be a part of the Sales Tax Report with respect to each
transaction effected with the Purchasing Card. If the vendor has a terminal or
computer submission system and enters all of the necessary information, the
XXXXX Sales Tax Report will allow the customer to identify the sales price of
the property, the amount of tax collected, the total amount of the transaction,
the tax situs of the sale, the processing date and/or the transaction date and
a brief description of the purchase. If the vendor does not have the computer
submission system or fails to enter all necessary information, the XXXXX Sales
Tax Report may only reflect the total amount of the charge without any
accompanying detail. In all situations, however, the customer will be able to
identify either the date of the transaction or the processing date of the
charge, the destination or taxable situs of the property, and the total amount
of the transaction. By use of this card, a firm could make multiple purchases
of taxable property from different vendors without issuing a purchase order and
make payment with one remittance to XXXXX. Your firm will provide the sales tax
report to the customers either in PC format. by diskette or modem, or in paper
format, where a hard copy of the detailed listing is provided.
DISCUSSION
XXXXX General Statutes
105-164.4 and 105-164.6 levy the XXXXX sales and use tax on retail sales or
purchases of tangible personal property.
G.S. 105-164.22 and G.S. l05-164.23 set out record keeping requirements
for retailers and consumers. G.S. 105-164.26 sets forth the presumption that
all receipts of retailers and wholesale merchants are subject to the retail
sales tax at the general rate of tax until the contrary is established by
proper records. The retail sales tax in XXXXX is a privilege tax levied on the
retailer and the retailer’s records must substantiate that the appropriate
sales tax was charged on each transaction. use tax due on purchases from
outside XXXXX the liability of the purchaser, but this liability can be
extinguished by a nonresident vendor collecting and remitting the
applicable tax.
Supporting invoice
detailing a transaction will normally satisfy both the seller's and purchaser's
record keeping requirements. The use of the card does not affect either the
seller's or the purchaser's record keeping responsibilities. Local government
sales and use tax laws impose a 2%
county tax on all transactions which are subject to the 4% general rate
of State sales and use tax.
DETERMINATION
Based on our review of
the information to be provided to the customer in the format submitted, it is my
determination that:
1.
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 XXXXX Sales
Tax Reporting 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.
2.
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 transactions using
XXXXX, 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 non-XXXXX transactions.
the vendor and the purchaser must retain documentation to substantiate an
exemption from tax, purchases taxed at rates less than the general State and
local rate and any maximum tax due on single articles as required by XXXXX law.
Please let me know if
you have questions regarding the matter.
Very truly yours,
XXXXX
Sales and Use Tax
Division
Re: Request for Ruling: Retail Sales and Use Tax
XXXXX.
Dear XXXXX:
This is in response to
your letter of XXXXX in which you seek a ruling regarding acceptable records
for sales and use tax purposes.
FACTS
XXXXX (the “Taxpayer”)
is marketing a corporate purchasing card that allows client companies through
their employees (“cardmembers”) to purchase goods and services without the need
to issue purchase order forms. Also, vendors would not necessarily issue paper
invoices to the Taxpayer's clients on corporate card purchases. Rather, clients
receive a monthly statement from the Taxpayer and pay corporate card purchases
with one check instead of paying invoices generated by individual vendors.
To alleviate concerns
regarding sales or use tax documentation on these paperless transactions, the
Taxpayer has developed a sales tax reporting system to replace paper invoices.
Under this system, each vendor will electronically transmit specific
sale-related data to the Taxpayer. On a monthly basis, the Taxpayer furnishes
to the client a print-out and/or a tamper proof disk containing the
sales-related data furnished by the vendor with respect to each transaction.
This data consists of a product description; the name, state and ZIP code of
the vendor; the name city state and ZIP code of the cardmember, and the
cardmember's cost center The sales tax reporting system also separately lists
the total amount billed the separately stated tax amount and the applicable tax
rate.
You also indicate that
in most instances when goods are shipped, the Taxpayer can precisely identify
the taxing jurisdiction (state, city and ZIP code) However, in some situations,
the Taxpayer will only have access to the ZIP code In such cases and by using
information other than that supplied by the Taxpayer, clients may be able to
identify the appropriate taxing jurisdiction.
The Taxpayer requests
a ruling determining, first, if its sales tax reporting system is an acceptable
substitute for vendor generated paper invoices. The Taxpayer also inquires if
the information it provides to clients identifying taxing jurisdictions is
acceptable as accurate.
RULING
Code of XXXXX § 58.1-633 provides that:
Every dealer required
to make a return and pay or collect any tax under this chapter shall keep and preserve
suitable records of the sales, leases, or purchases ... taxable under this
chapter, and such other books of account as may be necessary to determine the
amount of tax due hereunder, and such other pertinent information as may be
required by the Tax Commissioner.
Further, XXXXX
Regulation 630-10-24 indicates that “identification of the tax by a separate
writing or symbol is not required provided the amount of the tax is shown as a
separate item on the record of the transaction.”
I find that the information
provided by the Taxpayer to clients through the sales tax reporting system
satisfies these criteria and may be used by clients as an acceptable substitute
for paper invoices. In regard to precisely identifying the appropriate taxing
jurisdiction, the responsibility for doing so rests with the client. It appears
that in most instances the sales tax reporting system does provide this
information accurately. In those few situations where the Taxpayer cannot
precisely identify the appropriate taxing jurisdiction, the client may use
other information to properly allocate the tax on its untaxed purchases.
If you have any
additional questions about this letter, please contact XXXXX in my Office of
Tax Policy at XXXXX.
Sincerely,
XXXXX
Tax Commissioner
Dear XXXXX:
This letter is sent to
confirm what XXXXX. (hereinafter, XXXXX) has written and personally explained
to the XXXXX Sales & Use Tax Division regarding the company's “Corporate
Purchasing Card Sales Tax Reporting” and to notify XXXXX that, as a matter of
policy, the report is acceptable as a reliable document alternative to the
receipt and maintenance of vendor generated invoices for XXXXX use tax audit
purposes.
XXXXX Sales Tax
Reporting
As described, data on
each purchase card transaction will be accumulated and sent to each card
holder. Details about the vendor
[reference #, name, location zip code]; about the card holder [name,
account number, location zip code, and cost cen er]; transaction [date, total
charged, tax amount, description; as well
as computer calculated data [base amount of the transaction, the rate of
tax collected] will be furnished to the card holder. Depending on whether the
card holder picks up or is shipped an item, the system, through software purchased
by XXXXX, will also identify the maximum rate of tax due in the jurisdiction,
based on the system logic.
The card holder will
be sent a monthly report either on a paper medium or through a PC option. The
PC option can be via diskette or modem. Regardless of the format, a summary of
all activity is furnished with the individual transaction details. Depending on
the nature of the equipment used by the vendor to record the transaction, the
description of the purchase may be limited to a nine code reference [terminal
input] or more extensive [up to 160 bytes of computer inserted data].
Advice on
Acceptability
Based on the written
and verbal representations and the ability of XXXXX to produce records that
comport with the sample documentation provided, XXXXX Sales and Use Tax
auditors will be advised to accept the XXXXX Sales Tax reporting as an adequate
replacement for vendor generated invoices. Card holders must understand that
the XXXXX Revised Code presumes tax applies unless the contrary is established
and that the card holder and its suppliers must comply with XXXXX directions on
handling taxable and nontaxable transactions on separate billings. Moreover,
the potential for very generic descriptions may require some assurance that a
more precise description can be readily obtained, especially where a cost
center indicates a usage of mixed taxable consequence.
Conclusion
It is my hope that the
essence of your system has been adequately set forth. To the extent that
it has and that XXXXX, its member card
holders, and their suppliers comport with then intended operation of the
system, the documentation is an acceptable replacement to the traditional
vendor generated invoices. Because of the rather limited number of description
codes, that can be terminally inputted, it may be necessary to obtain supplemental information for some
transactions where the description is not clear. The subsequent reconstruction
of any information available at the time of sale by the card holder-consumer is
as valid for your system as it is now when invoice descriptions are generic. If
the nature of an item or its use appears unclear, it may also be wise to obtain
and keep back-up details at the time of purchase rather than try to secure them
later.
I trust that this reply
has adequately addressed your concerns.
If not, and further attention to this matter is necessary, please let me
know.
Sincerely,
XXXXX
Mr. W. Val Oveson,
Chairman
Utah State Tax
Commission
Heber M. Wells
Building
160 East 300 South
Salt Lake City, Utah
84134
Re: XXXXX -- Ruling Request
Dear Mr. Oveson:
It was a pleasure to
see you again at the recent XXXXX Both XXXXX and I appreciated the opportunity
to speak to you again about the XXXXX ruling request. As we agreed then, we are
now forwarding a full set of the rulings we have received to date -- rulings
from the states of XXXXX. We hope that reviewing these rulings may assist you
in understanding the scope of our ruling request.
We believe that the
more recent rulings -- especially from XXXXX -- do an especially good job of
educating taxpayers about the tax issues posed by the XXXXX and of recognizing
that these issues are not different from those that exist today in the world of
paper invoices. The ruling request only asks Utah to accept CPC Sales Tax
Reports instead of vendor-generated invoices for evidence of information
traditionally found on such invoices. It does not ask Utah to modify its
standards of what is sufficient on audit.
Thus, if the
information on the CPC Sales Tax Reports is sufficient to evidence compliance
(i.e., it shows the separately stated tax collected by the vendor at the full
tax rate), it is acceptable and no further issues arise. If the information on
the Sales Tax Reports is not sufficient to evidence compliance (i.e., it shows
no separately stated tax collected), the taxpayer will have to show that tax
was appropriately self-assessed or bring forward other acceptable evidence of
payment or proof that tax was not applicable.
We recall your mention
of a “mock argument” on the subject of our ruling and we would welcome the
chance to assist the “advocate” in preparing for the argument. In fact, after
you and your staff review the attached rulings if you still have concerns, we would
welcome the opportunity to meet with you again to discuss our request.
In conclusion, we
again thank you for your consideration. If you have any questions. do not
hesitate to call me at XXXXX
Very truly yours,
XXXXX
Tax Attorney
RE: Advisory Opinion - Corporate Purchasing Card
Sales Tax Reporting System
Dear XXXXX,
We have again reviewed
your request for ruling that the XXXXX Sales Tax Report is sufficient to
fulfill a cardholder's sales tax record keeping requirements. We find as
follows:
A taxpayer is required
to maintain sufficient sales tax documentation to demonstrate the following:
1.
Transaction date (usually the purchase date for sales tax purposes and
the delivery date for use tax purposes)
2.
Vendor.
3.
Purchaser (cardholder).
4.
Total amount of sale and total amount of sales or use tax paid.
5.
Sufficient item description to distinguish between taxable and
non-taxable items.
6.
Delivery address (if different from the cardholder's mailing address).
7.
Separately stated non-taxable charges.
8. FOB information (if claiming an
exemption for shipping charges).
As we understand your
system. your software will generate a sales tax report based on ( 1 )
information residing in your database, and (2) information supplied
electronically by the vendor at the point of sale. The information residing in
your database will automatically identify the vendor and the purchaser (items 2
and 3 above). The system allows the vendor to input the total amount of sale and
total amount of tax (item 4). the transaction date (item 1 ), and a shipping
address zip code (which partially satisfies item 6), and a description (item
5). The vendor may be able to input additional information in an optional open
field. The optional field may be used to supply FOB information, delivery
address, or other required documentation.
You indicate that your
system identifies the delivery address by city, state and zip code. As stated
in our prior correspondence, that information is not sufficient to identify the
taxing jurisdiction If the cardholder implements a policy requiring that all
card purchases be shipped to the mailing address, that policy will satisfy
audit requirements soon as adherence to the policy is properly documented In
the alternative, the cardholder must retain separate documentation of delivery
addresses.
Based on these facts,
the sales tax report provided by your system will meet our data reporting
requirements provided that the vendor supplies the information described here
and the cardholder documents the delivery address. If the report does not
adequately document the required information, the cardholder must supplement
the report with evidence of compliance.
For the Commission,
Alice Shearer
Commissioner