95-087
Response
January 3, 1995
Request
XXXXX
Sales
Tax Auditing
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, UT 84134
We
are submitting a letter of agreement between the State of Utah and XXXXX
outlining our sales tax collection procedures and the establishment of tax
exempt members at our Clubs.
In
addition to the practices we have described in our letter we are also
implementing an electronic imaging procedure in our home office Tax Department
to guarantee the accuracy of our tax exempt membership documents at the club
level. This procedure gives us the
ability to review each of the tax exempt documents as to its completeness so as
to comply with Utah sales tax statutes.
These tax exempt procedures will be followed by all Utah XXXXX.
We
have listed you as the appropriate authority to sigh our letter of agreement
with the State of Utah. If in your
determination, this authority rests elsewhere, please let us know and we will
resubmit.
Sincerely,
XXXXX
XXXXX
Sales
Tax Auditing
Utah
Tax Commission
210
North 1950 West
Salt
Lake City, UT 84134
Dear
XXXXX
This
letter is written to set forth the terms of an agreement between XXXXX and the
State of Utah, regarding the implementations of XXXXX sales tax collection
procedures, sufficient to fulfill its obligation under Utah Sales Tax law. It’s our understanding that XXXXX compliance
with these procedures will be sufficient to release it from further liability
regarding its sales tax collection obligations under Utah sales tax
statutes. These sales tax collection
procedures, which are to be followed by all Utah XXXXX, are set forth in the
following paragraphs:
Membership
Application:
1.
The completion of membership applications will include the requirement of
production of documentation (including Certificate of Registration where
applicable) sufficient to verify business operations.
2.
If the applicant is applying for wholesale membership and is in the business of
resale (classified as “x” member), a Multi-Jurisdiction Sales Tax Exemption
Certificate (see attached form) will be required to be completed by the applicant.
3.
On each resales certificate, the Utah taxpayer number will be required. If possible, a copy of the sales tax permit
will be obtained from the applicant and placed on file.
4.
Upon the satisfactory completion of Steps #1-3, new members will be issued a
membership card including a photo I.D. for the business member.
5.
If applicant is applying for wholesale membership and is an exempt organization
or has exempt status (classified as “x” member), a Multi-Jurisdiction Sales Tax
Exemption Certificate (see attached form) will be required to be completed by
the applicant.
6.
Each membership will contain special coding which will denote the type of
member. This coding, when input at the
cash register, will indicate the membership type, thus informing the checkout
personnel of those business members qualified for resale of merchandise and the
corresponding sales tax exemption.
Operations:
1.
When a member purchases merchandise, he/she will be required to present his/her
membership card. For those members
designated as “x-members,” the checkout person will ask the following question:
“Are any of your items for resales,” or “Are the items for exempt use”. For each item designated by the member as an
item for resale or exempt use, the checker will depress the tax- exempt key on
the cash register which will not charge sales tax for that particular
item. The system automatically charges
sales tax on all items purchased unless the tax exempt key is depressed.
2.
The member will be asked to sign a Non-Taxable Sales Log. (See attached.) Such log will contain a statement by which the member will
certify that all purchases are to be resold in the normal course of its retail
business or are for exempt use in a qualified, tax exempt organization. The form will also record a register
transaction number which will allow the matching of the member’s certification
and signature with the actual transaction on the cash register detail tape. During 1996, the system may be enhanced
allowing the resale or tax exempt member to actually sign a duplicate cash
register tape containing a statement by which the member will certify that all
purchases are to be resold or are for exempt use within the organization.
3.
At the end of the day the sales log (or duplicate cash register tape), which
will be maintained at each register in a legible manner, will be matched with
the register detail tape and stored locally at each club. These records will be available for review
by the Utah Department of Revenue; however, it is requested that such a review
be coordinated through XXXXX, Director of State and Local Taxes, XXXXX.
Administration:
1.
On a quarterly basis, each XXXXX unit will provide the state with their list of
“x-members” and their respective tax-exempt numbers to be compared by the state
with its master file of valid existing numbers. The state in turn will supply to XXXXX a listing of invalid
numbers and those members no longer in business.
2.
Upon receipt of the listing of invalid numbers and members no longer in
business, XXXXX will correct the classification of the member from “x-member”
to a taxable member (W. or A. member).
XXXXX
wishes to be in compliance with the Utah sales tax laws, which is evidenced by
its willingness to incorporate such an extensive set of “checks and
balances.” At the same time, XXXXX
would like assurance that if it adheres to these procedures, that it would be
deemed to have exercised ordinary care, thereby being entitled to rely upon
resale certificates presented by customers attempting to qualify their
purchases for the “sale for resale” exemption.
If this letter correctly sets forth your acceptance of these procedures,
please so acknowledge by signing this letter below and returning same to me.
Sincerely,
XXXXX
XXXXX
RE: Advisory
Opinion - XXXXX Sales Tax Records
Dear
XXXXX
We received your request for an
agreement between the Utah State Tax Commission and XXXXX Stores pertaining to sales
tax record keeping requirements. We do
not normally enter contractual arrangements of this nature, but we offer the
following guidance for your information:
We are satisfied, from the
description provided in your letter that XXXXX is diligent in its efforts to
identify members who are eligible to make tax-exempt purchases. However, we caution you regarding your use
of the Multi-Jurisdiction Sales Tax Exemption Certificate as follows:
Few Utah sales tax exemptions are
blanket exemptions. A manufacturer, for
instance, must fit within a specified group of industries, and the
manufacturer's purchases must fit within the legal parameters of qualified
manufacturing equipment. Likewise,
private educational institutions are tax-exempt only if they qualify as
religious or charitable organizations.
We have designed our exemption certificates, TC-72 1 and TC-7'7 I G
(copies enclosed), to identify the general conditions imposed on a purchaser
who claims a sales tax exemption By signing our form, the purchaser verifies
that he or she qualifies for the exemption under the limitations imposed by
law. We do not require you to use our
particular form, but we require some form which contains the same information
and the purchaser's signature.
XXXXX keeps each member's exemption
certificate on file with its tax records.
Rather than completing an exemption certificate for each sale, the
customer signs the NON-TAXABLE Sales Log.
The log provides a link between each transaction and the customer's
exemption certificate. This process is
satisfactory to us, but we again caution you that the categories listed at the
bottom of the form do not completely describe the eligibility for the exemption
For this reason, we prefer that the log be linked to our TC-72 1 or TC-72 I G
because our forms demonstrate the members' understanding of the limitations of
the exemption claimed.
With regard to your request that we
verify each XXXXX unit's exempt membership list on a quarterly basis. Let us make an alternative suggestion. We ask that you deliver the list to us on
disk. We will write a program to
quickly compare your file to our exempt file and we will notify you of any
discrepancies. We should mention that
we do not issue tax identification numbers to government entities, so the
schools or other government entities shown on your file will not match on our
file. They are nevertheless eligible to
continue to make tax-exempt purchases.
In our experience, we withdraw very few
businesses or individuals from our tax exempt file over the course of each
year. Therefore, a semi-annual
comparison should be sufficient. Please
direct your first submission to our Tax Policy Analyst, XXXXX. She will direct the information to the appropriate
unit within the Tax Commission to write the program to compare the lists. Thereafter, we will notify you of a contact
person who will actually run the comparisons for you.
Thank you for your willingness to
work with us on this issue. We look
forward to hearing from you in the future.
For the Commission,
Alice Shearer
Commissioner