95-068
Response
October 5, 1995
Request
Dear
Madam or Sir,
I
am writing to you regarding the company named XXXXX located at XXXXX, XXXXX, UT
XXXXX. This establishment sells its products through a chain of independent
distributors located all over the country. It charges all local state taxes
even though it does not have representatives in any of them. More than that -
it charges taxes from suggested retail price rather than from actual price the
product is purchased by a distributor, and it charges full amount up front -
prior to shipment.
This
seems to be illegal and unfair business practice. As far as I know, the firm
cannot charge sales tax outside its home state if it does not have a
representative in the state where the product is purchased as well as nobody
can charge tax for amount larger than actual sale price since a distributor has
a right to sell product at any price or to use it for his or her personal needs
which means that XXXXX charges higher tax rate than allowed by law.
Thank
you very much for your consideration, looking forward to hearing from you soon,
XXXXX
XXXXX
RE: Advisory Opinion - Application of Utah sales
tax to sales by a Utah vendor to customers outside of Utah.
Dear
XXXXX,
Your
inquiry regarding sales by XXXXX has been referred to us by the Attorney
General's Office. We hope the following information is helpful.
In
your letter, you state that the Utah company is charging "local state
taxes." We assume that you mean that the Utah company is collecting local
XXXXX sales or use tax on merchandise delivered to XXXXX. Utah vendors who do
business in other states are responsible for complying with the tax laws of
those states. If XXXXX state law requires Utah vendors to collect use tax on
products they ship or deliver to customers in XXXXX, the Utah vendor is obliged
to do so.
From
the invoice attached to your letter, it appears that XXXXX ships products
directly to a distributor or retailer in XXXXX. Technically, the sales
transaction between XXXXX and its distributors are tax exempt so long was
products are purchased for resale. It is the distributor who is responsible for
collecting Illinois tax on each transaction. We are aware, however, that many
network marketing companies arrange to handle the sales tax accounting for
their distributors through arrangements like the one you have described.
Whether such an arrangement is legitimate depends upon XXXXX state law.
If
you have questions about XXXXX obligations under XXXXX law, please contact your
state revenue agency. If you have additional questions regarding Utah sales and
use tax, please let us know.
For
the Commission,
Alice
Shearer
Commissioner