96-044

Response March 8, 1996

Request

February 9, 1996

Dear Sir:

The purpose of this letter is to request your opinion regarding possible tax obligations of a state- chartered out-of-state bank doing commercial transactions in your state. The out-of-state bank would not have a physical presence in your state.

Each commercial transaction would involve a manufacturer who would be selling office and medical equipment to doctors located in your state. There could be more than one manufacturer selling goods to the same doctor and the manufacturer may or may not be located in your state. The manufacturer would sell the goods to a doctor by extending a revolving line credit. The revolving line of credit would then be sold to the out-of-state bank. The bank would become the holder of a security interest in the goods purchased by the doctor. The line of credit to each doctor would not exceed $$$$$.

The question is: will these commercial transactions require the out-of-state bank to incur tax obligations in your state?

I have previously sent inquires about registration/licensing requirements to the banking authority and the Secretary of state in you state. However, these inquires did not specifically cover tax questions.

Please direct all correspondence regarding this request to XXXXX. I would appreciate your attention to this matter. Please call me at XXXXX if you have any questions about this request.

Very truly yours,

XXXXX

March 8, 1996

XXXXX

RE: Advisory Opinion - Tax obligations of out-of-state bank

Dear XXXXX

We have received your request for an opinion regarding the tax obligations of an out-of-state bank that extends credit to Utah doctors. We find as follows:

If the out-of-state bank has no physical presence in Utah, it has no corporate franchise tax obligation in this state. However, if the out-of-state bank has employees, agents or inventory in Utah, or if the bank acquires property in Utah through repossession, corporate franchise tax obligations may arise.

On the basis of the facts stated in your letter, the out-of-state bank's only contact in Utah is by operation of a secured loan agreement with a Utah doctor. Therefore, under current Utah law, the bank has no Utah corporate franchise tax obligation.

Please let us know if we can be of further assistance.

For the Commission,

Alice Shearer

Commissioner