97-075
Response December 23, 1997
November
26, 1997
Dear
Ms. Rees
I
am writing this letter to request an advisory opinion. My client has received
conflicting verbal advice from the Tax Commission and would like to resolve the
issue once and for all.
The
issue deals with the sales tax exemption made available to religious organizations. According to the Code Book Section
59-12-104, a religious organization is granted an exemption from the sales tax
at the point of sale if the transaction is at least $1,000 in value. If the
transaction is less than $1,000, then the transaction is taxed and the
religious organization is required to submit a refund request for the sales tax
paid. Then the Code goes on to state
that the exemption is granted at the point of sale if the transaction is made
under a contract between the vendor and the religious organization.
A
few years ago my client was audited by the Utah State Tax Commission. During
the course of the audit the auditor advised my client of the rule change
involving the exemption from sales tax for transactions in excess of $1,000
apiece. For Those transactions under
$1,000 my client was assessed sales tax. At no time did the auditor raise the
issue of exempting these transactions under the one exception which states that
a contract can be made between the religious organization and the vendor to
exempt transactions between them.
Based
upon the results of this audit, my client began to assess sales tax on
transactions involving the religious organization for transactions under $1,000
apiece. Recently, my client was presented
with a sales tax exemption contract prepared by COMPANY A. They are asking us
to sign the contract and exempt all transactions my client does for them.
Taking this request and the experience my, client had with the recent audit,
they called the Technical Research section of the Commission and spoke to
Nicole. The situation was explained to her and the response that she gave my
client was that they were to impose sales tax for transactions under $1,000 and
exempt transactions in excess of $1,000. She stated that the religious
organization had no right under Utah law to exempt itself from sales tax by
contract. Armed with this response my client charges sales tax on the
transaction to the religious organization.
When
the organization received the bill from my client, they objected to the sales
tax charge. They stated to my client that the sales tax exemption contract
they presented to my client was
furnished to them by the Utah State Tax Commission. At this point my client
called the
Technical
Research department of the Commission and asked for further clarification. This time a gentleman listened to the facts
and concluded that the sales tax exemption contract was valid, that the
exemption was written into the Code and that Nicole provided an incorrect
answer to my client. My client then explained the facts surrounding the
conflicting advice they received. This gentlemen in Technical Research
suggested that my client contact you to seek a written opinion on the issue so
that the law can be applied correctly.
Therefore, my client is requesting an advisory opinion on how to apply
Code Section 59-12-104.1 in relation to
the section of the Code which discusses the issue of assessing tax for
transactions under $1,000 and exempting transactions over $1,000 made to
religious organizations.
Yours
truly,
NAME
December
23, 1997
NAME
ADDRESS
CITY
STATE ZIP
Advisory
opinion - Religious exemptions on purchases amounting to less than $1,000.
Dear
NAME,
We have received your request for
sales tax guidance pertaining to your client who makes sales in Utah to
religious organizations. Specifically
your question is whether your client can enter a contract with a religious
organization which allows that organization an exemption at the point of sale
for small purchases. We find as
follows:
Sales to a religious or charitable
organization are generally exempt from sales tax. On purchases of less than $1,000, the exempt purchaser normally
pays the tax to the vendor at the point of sale, then requests a refund
directly from the Tax Commission. This
arrangement is designed to relieve the vendor from the extensive recordkeeping
that may accompany small day- to-day transactions with exempt organizations. Recognizing that a religious or charitable
organization may do a lot of business with one vendor, the legislature
authorized an exception to this general rule.
Section 59-12-104.1 (2) (b) (iii) (copy enclosed) allows an exemption at
the point of sale if the sale is “made pursuant to a contract between the
vendor and the charitable or religious institution or organization.”
Your client is authorized to enter a
contract with a religious organization.
Your client may use the enclosed
TC-73 form, or it may use any other contract form that contains substantially
the same information. The form also
serves as an exemption certificate. As
such we suggest that your client renew the form every three to five years if
there is any doubt as to the purchaser’s continued exempt status. Your client need not obtain exemption
certificates on individual purchases.
However, your records must relate each exempt sale back to the contract
in some fashion. This can be accomplished
through use of purchase orders or other documents that identify a sale with the
contract and the exempt purchaser.
Please extend our apology to your
client for the confusion. Let us know
if we can be of further assistance.
For
the Commission,
Joe
B. Pacheco,
Commissioner
December
23, 1997
NAME
ADDRESS
CITY
STATE ZIP
Re: Exempt purchase contracts.
Dear
NAME,
We have recently received an inquiry
from a tax representative whose client has been asked by the COMPANY B to enter
an exempt purchase contract agreement.
We are supplying you with a copy of our response to the tax
representative in order to avoid causing any confusion between your
organization and the vendor.
Please let us know if you have
questions about this issue.
For
the Commission,
Joe B. Pacheco,
Commissioner