97-025
Response
May 8, 1997
REQUEST
LETTER
Dear
Ms. Shearer:
Our
firm represents a client located outside your state who is involved in the
manufacture of component products primarily used in display room areas. The
products are sold predominantly to dealers and only occasionally to an
individual.
Our
client does not maintain a stock of goods anywhere except STATE. All goods are
shipped from STATE via United Parcel Service or by a contractor
(transportation) for hire. We do not have a sales force outside the State of
STATE, as our sales are to qualified dealers.
It
would be greatly appreciated if, at your earliest convenience, if you would
provide us with your letter ruling as to the nexus of our client, as well as,
your ruling as to the transportation delivery charges.
Respectfully
requested,
NAME
RESPONSE LETTER
NAME
ADDRESS
CITY
STATE ZIP
Advisory
Opinion - Nexus
Dear
NAME,
We have received your request for
tax guidance pertaining to nexus. Because
your request letter addresses sales by your client, we assume that you are
interested in whether your client has responsibility for collecting and
remitting sales or use tax on its sales into Utah. If you also have questions concerning nexus for corporate tax
purposes, please let us know.
Use tax is a tax on the storage, use
or consumption of tangible personal property in Utah. When tangible personal property is sold in interstate commerce
for use or consumption in this state, the sale is subject to Utah use tax. Although use tax is the liability of the
purchaser, the retail vendor is responsible for collecting and remitting the
tax to the State of Utah if the vendor has nexus with Utah. A vendor has nexus with Utah if it has an
office, a warehouse, a salesperson, or other physical presence 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.
Therefore, your client has nexus
with Utah if it owns property here, if it has sales agents here, or if it
provides service or maintenance for the equipment, either directly or through
an agent. A third party who is in Utah
and acting on behalf of your client to sell, or to provide repair or
maintenance for the items sold may create nexus for the client. We will look closely at the nature of the
relationship between the vendor and the third party to make that determination.
We do not fully understand the
nature of your client’s sales. For
instance, you state that your sales are to qualified “dealers” in Utah. If the dealers are purchasing items from
your client for resale, they may purchase the items tax free upon giving your
client a Utah resale exemption certificate.
If the dealers are purchasing items for display or some other nonexempt
purpose, the dealer is liable for sales tax on the purchase of the items. If your client has nexus, your client must
collect and remit the sales tax to the commission. If your client does not have nexus, the dealer must accrue and
remit the use tax directly.
Regarding shipping charges, these
charges are exempt if the sale is exempt or if the transaction satisfies all of
the following conditions:
1. Shipment must take place by means of
common carrier.
2. Charges
must be segregated and listed separately.
3. Charges must reflect the actual cost of
shipping the particular tangible personal property by common carrier.
4. Shipment of the tangible personal
property must take place after passage of title. If shipment of the tangible personal
property occurs before the passage of title, shipping costs, to the extent
included in the sales price of the item, and regardless of whether they are
segregated on the invoice, shall be included in the sales and use tax base.
A copy of Utah Administrative Rule R865-19S-71
is enclosed for your information.
Please let us know if you have other questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner