96-147
Response October 10, 1996
Request
September 11, 1996
XXXXX
Tax Policy Analyst
Utah State Tax Commission
210 No 1950 W
Salt Lake City; UT 84134
Dear XXXXX
Thank you for returning my call last Monday,
XXXXX, regarding XXXXX's tax exemption
and third party business.
You helped to answer several of my questions
regarding how to determine when a XXXXX unit was involved with a third party
business and how, if needed, the necessary sales tax was to be collected.
However, after our conversation there still seems to be a question, especially
in regard to bookfairs.
If I understand the information that you gave me, it
is not considered a third party business if the XXXXX collects the money, puts
it into their account and then pays the vendor for the products ordered. It
would be considered that the XXXXX had purchased the items and then sold them.
XXXXX would be able to purchase and sell these items tax free.
I hope that you can give me some clarification
regarding these issues so that we can give our XXXXX units the correct
information when they do business with the various fund raising companies.
Also, would it be necessary to inform vendors that
they are required to pay Utah Sales Tax when doing business with XXXXX units in
the state?
Thank you for your help in this.
Sincerely,
XXXXX
XXXXX
Advisory opinion - sales by the XXXXX of books and
other items.
Dear XXXXX
We
have received your request for confirmation that books sold by the XXXXX are
not subject to sales tax. As we
understand your transactions, an outside vendor makes available order forms
that the XXXXX uses to solicit sales.
The XXXXX accepts the orders along with payments for the books ordered,
and places the payments into the XXXXX account. The XXXXX then orders the book and pays the publishing company
out of the XXXXX account.
When
the XXXXX structures its sales in this manner, the XXXXX is regarded as
purchasing the books and reselling them to students. Because the XXXXX may purchase and sell tax free in the course of
its normal charitable activities, it is unnecessary to collect sales tax on
these transactions.
We
want to take this opportunity to alert you that the XXXXX must collect sales
tax on any sales income arising from unrelated business activities unless the
sales are otherwise exempt. Utah
Administrative Rule R865-19S-43 ties the term "unrelated trades or
businesses" to section 513 of the IRS Code. Therefore, if the XXXXX is required to include receipts from some
of its sales in its taxable income for federal income tax purposes, the
activities that generated those receipts are ineligible for the sales tax
exemption unless some other exemption applies.
Please
let us know if you have other questions.
For
the Commission,
Alice
Shearer,
Commissioner