97-038
Response
June 26, 1997
May 20, 1997
Dear Director:
I
am writing to you on behalf of a client who is planning on establishing a chain
of retail stores in the State of Utah and seeks tax guidance. My client is a mail order company, operating
out of California, whose only business activity in Utah in the past has been
with residents who order merchandise by mail order from the company's
California facility. Although it is our
position that these interstate activities are protected under the Commerce
Clause pursuant to National Bellas Hess v. Department of Revenue, 386 US 753
(1987) , we acknowledge that operating retail locations within the State of
Utah will establish the firm's nexus within Utah. My client, who prefers to remain anonymous initially due to the
sensitivity of this issue, has asked me to contact you on its behalf, and to
obtain a ruling on the effect, if any, that the establishment of a chain of
retail stores in Utah will have on the taxability of its mail order sales in
Utah.
On
16 May, 1997, a representative of my client spoke anonymously with NAME of your
Technical Research Department. It was
NAME's preliminary opinion, based upon the facts set forth below, that although
any retail activities would require the collection of Utah sales tax, my
client's mail order sales in Utah will remain exempt. The following facts regarding my client's operations
("Company") were verbally conveyed to NAME, and are hereby presented
for your review at his suggestion:
12) The Company,
a California Corporation engaged in mail order and retail sales, wishes to
expand its chain of retail stores into the state of Utah.
2) The Company has not previously had any physical
presence in the State of Utah, and it has engaged in business with Utah
residents solely through mail order operations.
3) The Company will duly register with the
State of Utah's Division of Corporations, and will obtain any state, county,
and local licenses necessary to both register the Company, and to engage in the
business of retail sales.
4) The Company operates separate divisions
for its retail and mail order activities.
The mail order division will continue to operate independently of any
retail locations in the State of Utah.
Orders from Utah residents to the Company's mail order division are
taken, processed, and shipped from outside Utah.
5) The Company does not allow any mail
order activity, including, but not limited to, placing orders, accepting
returns, or distributing catalogs to be conducted from its retail locations.
6) Although the Company's retail division
will establish nexus in Utah by virtue of the presence of its facilities,
employees, and inventory, the mail order division will continue to maintain its
merchandise, employees, and facilities outside the state of Utah.
7) The Company
recognizes its responsibility to collect Utah sales tax on its retail
operations and will do so according to the laws and regulations of the State.
8) It is the
Company's desire to comply with all of the State's requirements as
expeditiously as possible, so that it may proceed with its retail expansion
plans.
Should
you require any further information in order to issue a written ruling as to
whether or not the Company's mail order division will be required to collect
taxes on sales to Utah residents under the above circumstances, please do not
hesitate to contact me. Upon receipt of
a written ruling on this issue, I will contact my client with your
determination. When my client is
prepared to begin operating in Utah, its representatives will contact you
directly. Thank you in advance for your
prompt attention to this matter.
Sincerely,
NAME
June
26, 2997
NAME
ADDRESS
CITY STATE ZIP
Advisory Opinion - Sales tax nexus
Dear NAME,
We
have received your request for sales tax guidance as to whether operating
retail stores in Utah creates nexus for the company’s mail order business. The answer is “yes.”
Under
Utah law, a vendor is required to collect and remit sales or use tax on its
taxable Utah transactions if the vendor has an office, warehouse, 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.
If
your client establishes retail stores in Utah, it will have nexus for all of
its sales in Utah -- including mail order sales conducted by another division
of the same company.
Thank
you for putting your request for tax guidance in writing. Documentation of your question and our
response may be helpful to you if this issue comes up again in the future. Please let us know if you have other
questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner