95-068

Response October 5, 1995

 

 

Request

July 5, 1995

 

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

 

 

October 5, 1995

 

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