96-042

Response March 8, 1996

Request

March 8, 1996

RE: Advisory Opinion - Contract pertaining to independent contractors

Dear XXXXX,

This letter is to follow up on our previous advisory opinion of XXXXX. In that opinion, we addressed your request that we enter a contract which would govern your responsibility to collect and remit sales tax on sales of products to Utah customers and Utah independent contractors. In the time that has lapse since that opinion, you have been in contact with our Deputy Executive Director, XXXXX. XXXXX has established that your company's transactions fall into two categories:

1. XXXXX sells products directly to Utah customers for their own use. These customers may agree to purchase a minimum amount of XXXXX products in order to qualify for certain price breaks. These sales are retail sales to Utah customer's for their own use, and the Utah customer must pay sales and use tax on the amount paid. Because XXXXX has a sales force of independent contractors in Utah, XXXXX has sufficient Utah nexus to require that XXXXX collect and remit that tax on these transactions.

2. XXXXX also contracts to sell its products in Utah through independent contractors. When an independent contractor purchases products from XXXXX for resale to Utah customers, the independent contractor may purchase the products tax free by furnishing XXXXX an exemption certificate. The independent contractor, in turn, is responsible for obtaining a Utah sales tax license and collecting and remitting sales tax on his or her retail sales. The tax is calculated on the actual retail sales price. Additionally, the independent contractor must remit sales tax on any item that was initially purchased tax free for resale, then consumed by the independent contractor for his or her own use. The sales tax is calculated on the independent contractor's cost.

As stated above, XXXXX's independent contractors must have a Utah sales tax license. However, XXXXX may act on behalf of its Utah independent contractors by collecting, remitting and reporting all sales tax due on their transactions. However, the sales tax must be calculated on either the actual amount for which the product was sold at retail or on the manufacturer's suggested retail price. If you wish to enter this type of agreement, XXXXX can make the necessary contractual arrangements.

We hope this information clarifies your options with regard to collecting and remitting Utah sales and use tax. Please let us know if you need additional information or assistance.

For the Commission,

Alice Shearer

Commissioner