96-145
Response October 30, 1996
Request
Monday, September 09, 1996
Sales Tax Division
Utah State Tax Commission
210 North 1950 West
Salt Lake City, UT 84134
Please consider the following a request for an
opinion or ruling on the facts stated herein:
FACTS
XXXXX is a California company engaged in the
support, maintenance, and administration of an electronic “mall” accessible
through the Internet and World Wide Web.
XXXXX is maintained on a server located in
California.
All design, implementation, support, maintenance, and
administrative services rendered by XXXXX are performed in California.
Except as noted below, XXXXX has no nexus in Utah.
XXXXX has been retained by client retailers, one or
more of whom is located in Utah, to perform the following services;
1. Design
and implement a Website for the client retailer, and
2. Support
and maintain the Website on an ongoing basis, and
3. Receive,
record, and take payment for sales made through the Website to the client
retailer's customers, and
4. Remit payment
of the client retailer's share of such sales to the client retailer.
XXXXX receives a commission on all sales transacted
through the Website. XXXXX is in
physical custody of funds remitted by our client retailer's customers, but is
never in possession of any personality related to the transaction.
XXXXX owns no direct or indirect interest in any of
its clients retailers.
The client retailer is solely responsible for any
manufacturing, purchasing , or any other acquisition of products sold through
XXXXX.
The client retailer is solely responsible for the
maintenance of any physical inventory of products sold through XXXXX. Such inventories will presumably be
maintained at the client retailer's premises, located in Utah.
The client retailer is solely responsible for the
fulfillment of any orders generated through XXXXX and fulfillments are made
from retail inventory maintained by the client retailer and located in Utah.
XXXXX may engage in sales of tangible personality on
its own account. some of these sales
may be transacted with customers located in Utah.
ISSUES ON WHICH WE SEEK AN OPINION:
It is clear to us that client retailers located in
Utah possess nexus sufficient to subject them to both sales and income tax
jurisdiction within Utah. However, we
are unclear as to XXXXX's responsibility in this regard. We therefore request a ruling on the
following issues;
1. Is XXXXX
responsible, as agent for its client retailers located in Utah, for the
assessment and collection of sales tax due on sales transacted with its client
retailer's customers in Utah?
(We presume the answer to this question is yea. Hence, the following questions)
2. Is XXXXX
responsible for remittance directly to Utah of sales taxes collected on behalf
of its client retailers located in Utah?
If remittances and accountings are made to XXXXX's client retailers, is
XXXXX's liability to Utah extinguished?
3. Is XXXXX
responsible for filing sales tax returns, either on its own behalf, or on the behalf
of its client retailers located in Utah?
4. Does
XXXXX itself, solely by virtue of its agency relationship with client retailers
located in Utah, acquire nexus in Utah sufficient to subject its own sales of
tangible personality to sales tax?
If so, do XXXXX's other client retailers (those not
located in Utah, solely by the virtue of their relationship with XXXXX, acquire
nexus in Utah sufficient to subject their sales of tangible personality to
sales tax?
Sincerely,
XXXXX
XXXXX
Advisory opinion - Sales tax on transactions using
the internet
Dear XXXXX
We
have received your request for sales tax advice pertaining to XXXXX’s
transactions on behalf of client’s. We
offer the following:
All
sales or leases of tangible personal property to customers in Utah are subject
to Utah sales and use tax. Although
sales and use tax is the liability of the purchaser, the retail vendor (or the
vendor’s agent) is responsible for collecting and remitting the tax to the
State of Utah if the vendor has nexus in Utah.
Utah Code Section 59-12-107 (5) 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.
A
vendor has nexus in Utah if it owns or leases property here; if it leases
property to Utah consumers; if it has sales agents here; or if it provides
service or maintenance for the items sold, either directly or through an
agent. An agent or independent
contractor with Utah nexus is enough to create nexus for the vendor.
If
XXXXX is acting on behalf of a vendor who has nexus in Utah, XXXXX must collect
sales tax on that vendor’s Utah sales.
The vendor is liable for the tax, but XXXXX may be required under the
terms of its agreement with the vendor to report and remit the tax to the Utah
State Tax Commission on the vendor’s behalf.
If XXXXX’s agreement with the vendor requires XXXXX only to collect the
tax and then turn it over to the vendor, the vendor must report and remit the
tax collected. We suggest that your
contracts with vendors clearly specify whether XXXXX is responsible for merely
collecting the sales tax or if it is also responsible for reporting and
remitting it.
Any
vendor who is required to collect and remit Utah sales and use tax is also
required to obtain a Utah sales tax license.
If XXXXX collects and reports sales tax on behalf of its clients, XXXXX
must have a Utah sales tax license. A
sales tax license application is enclosed for your use. If you have questions about this form or the
reporting requirements, please contact our Customer Service Division at
801-297-2200.
Regarding
XXXXX’s own sales in Utah, XXXXX is subject to Utah sales tax if it has nexus
in Utah as described in this letter.
The fact that XXXXX has clients who have nexus in Utah is not enough to
create nexus for XXXXX unless those client’s are acting as agents of XXXXX.
Nexus
requirements for sales tax purposes are slightly different from nexus
requirements for income tax purposes. A
publication describing these differences is enclosed for your information. Please let us know if you have other
questions.
For
the Commission,
Alice
Shearer,
Commissioner