96-128
Response September 17, 1996
Request
August 14, 1996
XXXXX, Attorney
State Tax Commission
210 North 1950 West
Salt Lake City, Utah 84134
DearXXXXX
Earlier this month I had a phone conversation regarding teachers who
have in the past been able to order books for their students. Teachers send home flyers from these book
companies, students and parents select the books they want to purchase, and the
parents send back the order form accompanied with a personal check. Teachers have allowed students to purchase
these books for many years. It is
voluntary and the books are taken home for their personal use.
This school year, teachers have been told by the district
administration that teachers will now have to charge sales tax on these book
orders. These books are not a
fund-raising project or are used for school supplies. They are purchased solely for the enjoyment of reading and to
encourage students to read.
When I spoke to you on the phone, you suggested I write you a letter
explaining this circumstance and that I provide a list of book vendors. You said you would then write a letter to
the vendors requesting them to pay the
sales taxes.
The following are the vendors:
XXXXX
I would appreciate your help in this matter. School is starting at the end of this month and it would be
helpful to have this matter resolved as quickly as possible. I would like also to request that I receive
a copy of the letter you send to the vendors so I will be able to pass on the
information to the teachers and school district officials.
Please call me at my office if you have any questions. Thanks for your help!
Sincerely,
XXXXX
XXXXX
RE:
Advisory Opinion - Application of Utah Sales Tax
Dear XXXXX
We
have received your letter regarding the sale of books to students in your
school district who order books from different book vendors. As you described the facts, these book
vendors rely on the students’ teachers to provide students with sales flyers
and to send the students’ order forms and checks back to the vendors. You contacted us because you were concerned
that schools in your district would be liable for the sales or use tax on these
sales.
You
correctly identified these sales as taxable sales. However, from the facts presented, these transactions seem to be
sales between the book clubs and students, with the teacher acting as an agent
for the seller. It is the
student/purchaser who must pay the sales tax, and the vendor or publisher who
is responsible for collecting and remitting the tax if the vendor is located in
Utah or if the vendor has a physical presence in Utah. Therefore, schools in your district are not
liable for paying or collecting the tax on these transactions.
As
you requested, we have sent a letter to the vendors whose names you provided
explaining that their book sales in Utah are subject to Utah sales and use tax,
and instructing them as to their responsibilities in that regard. Enclosed is a copy of the letter we have
sent to the book vendors.
We hope this information will resolve any
concerns your district and the respective vendors might have as to who is
responsible for charging sales tax for books sold to students. Thank you for
bringing this issue to our attention.
Please let us know if we can be of further assistance.
For
the Commission,
Alice
Shearer,
Commissioner
cc: XXXXX
XXXXX
XXXXX
Tax Policy Analyst
Office of the Commission
Dear XXXXX
Pursuant to our phone conversation earlier today,
this letter is to request a written response regarding the sales tax law as
applicable to book club sales in the public schools.
The relevant facts in the XXXXX are as follows:
The District encourages schools to have the PTA
conduct the book club sale (take orders, collect money, submit orders and money
to the book company, receive and distribute books, and deal with the sales tax due
to the third party involvement).
If a school does not use the PTA as outlined above
and instead chooses to run the book club sale, the District has a policy
whereby the school is required to run the money through the school's checking
account.
Our current instruction to the schools is that the
students must pay sales tax on the books they purchase. The sales tax is to be collected from the
students at the time the order is taken by the teacher. The money would then be deposited into the
school's checking account. A check
would be cut to the book company for the amount of the book purchase (no sales
tax included) and the sales tax that was collected from the students would be
remitted to the District on a quarterly basis.
The District then compiles all sales tax for all elementary schools and
submits it to the Commission on a sales tax return.
Thank you for your help.
Sincerely,
XXXXX
XXXXX
RE:
Advisory Opinion - Application of Utah Sales Tax
Dear XXXXX
We
have received your letter regarding the sale of books to students in your
school district who order books from different book vendors. We provide the following information as to
the applicable sales tax law.
As
you described the facts, book vendors furnish teachers in your district with
information about their books and sales order forms. Then, teachers distribute the order forms to their students who,
in turn, pay the school for the books.
That is, the teachers collect the amount due, then place the proceeds
from the sales into a school account.
The school then places one order with the book vendor and pays the
vendor from the school’s funds.
If
the book sales transactions in your district are handled as you describe, then your
current instruction to the schools regarding tax collection and remittance is
correct. The school must collect the
sales tax from the students making purchases and remit the tax to the Tax
Commission.
We
hope this information will resolve any concerns you may have regarding this
matter. Thank you for bringing this
issue to our attention. Please let us
know if we can be of further assistance.
For
the Commission,
Alice
Shearer,
Commissioner
Response letter to be sent to
the following vendors:
XXXXX
September 17, 1996
RE:
Advisory Opinion - Application of Utah Sales Tax
Dear [Vendors],
This
year, the Tax Commission has worked closely with Utah schools and school
districts to identify sales by or through schools that are subject to sales or
use tax. Subsequently, the XXXXX and
the XXXXX have requested advisory opinions as to who is responsible for
collecting and remitting sales tax for the sales of your books. This question may have Utah tax implications
for your company, and we want to take this opportunity to offer you sales tax
guidance. Each of the inquiry letters
that we have received provides a different description of the facts surrounding
your sales. Because each fact situation
yields a different outcome, we address each fact situation here for your
information.
Some
of the sales transactions have been described as follows: your company provides book information and
order forms to the teachers. The
teachers, in turn, hand the order forms out to their students. The students return checks for a stated
amount to the teacher, who forwards the checks to the book club. If your company participates in transactions
that are structured this way, your company is required to obtain a sales tax
license and collect and remit sales or use tax on each Utah transaction if your
company has nexus with Utah for sales tax purposes.
For
purposes of sales tax, a vendor has sufficient nexus in Utah if the vendor has an
office, warehouse, salesperson, or other physical presence in Utah. Utah Code Section 59-12-107(1)(a) states, in
pertinent part:
(1)(a)
Each vendor shall pay or collect and remit the sales and use taxes imposed by
this chapter if within this
state the vendor;
(I)
has or utilizes an office, distribution house, sales house, warehouse, service enterprise, or other place of
business;
(ii)
maintains a stock of goods;
. .
.
(iv)
regularly engages in the delivery of property in this state other than by common carrier or
United States mail; or
(v)
regularly engages in any activity in connection with the leasing or servicing
of property
located within this state.
Under
this statute, if a vendor has an agent in Utah, that agent’s presence is sufficient
to create nexus. An agent is someone
who is authorized to transact business or perform certain other acts on behalf
of another person or company. Thus, if
a teacher acts as salesperson or representative to transact business on behalf
of your company, the teacher’s presence in Utah is enough to create nexus. In that case, your company is liable to
collect the sales tax from the students or to pay the sales tax out of your
proceeds from Utah sales.
Other
book sales transactions have been described in a slightly different
manner. Namely, book clubs furnish
teachers with information about their books and sales order forms. Then,
teachers distribute the order forms to the students who, in turn, pay
the school for the books. That is, the
teachers collect the amount due, then place the proceeds from the sales into a
school account. The school then places
one order with the book club and pays the club from the school’s funds. If your book club is transacting business in
this manner, the school may purchase the books from your company tax free under
the resale exemption. The school, in
turn, must collect sales tax from the students making purchases and remit the
tax to the Tax Commission.
We
hope this information will help you determine whether your company is liable
for Utah sales or use tax. If you have
questions, please contact us.
For
the Commission,
Alice
Shearer,
Commissioner