98-021
Response
March 20, 1998
REQUEST
LETTER
February
24, 1998
To
whom it may concern,
I am interested in setting up a
temporary booth at a trade show in your state.
I need a written opinion from you regarding what type of activities will
create nexus in your state.
As a mail order company, I currently
engage in several activities which do not create nexus. As such, it is very important for me to
maintain my lack of nexus in your state.
As a small business owner, I would be put out of business if I was
required collect sales tax for your state or any state other than my own.
In reviewing the requirements it
appears that you could interpret my having booth space at a trade show in your state
as creating nexus. I need a written
opinion from you regarding that issue.
I have visited your website and
reviewed the obligations for collecting corporate tax. It appears that having a temporary trade booth for a period of less than two
weeks would not create nexus. I would
not be accepting deposits, approving or accepting orders. Although I would be
giving away catalogs, I would not be accepting any consideration in return.
However, there are some areas that
concern me. For example, I would be
carrying a temporary stock of goods for display only. Although I would not be
directly resolving customer complaints, if a customer walks into my booth with
a complaint, I would be doing my best to resolve it. Finally, although I would not have a company owned vehicle in
your state, my booth representative, which be, an employee of COMPANY A's,
would be driving a rental truck.
Please let me know whether, in your
written opinion on of these items would create nexus.
The trade show booth will be staffed
by employees of my company. Although
they will not be doing any selling, obviously
the purpose of the trade show booth is promote our products. Please include in your written opinion
whether or not this is enough to create nexus.
I will not be taking orders,
delivering orders, driving a company-owned vehicle in your state or servicing,
repairing and installing equipment.
However, I would be giving away samples of my mail order catalog. The mail order catalog is imprinted on cover
with a price of $3.00 but, no copies will be sold. Please include in your opinion whether giving away sample
catalogs would be an activity that
constitutes creation of nexus.
Looking forward to hearing from you.
Sincerely,
NAME
March
20, 1998
NAME
ADDRESS
CITY
STATE ZIP
RE
- Application of nexus to temporary booth at trade show
Dear
NAME,
We have received your letter asking
whether an out-of-state corporation is exposed to nexus with Utah by setting up
a temporary booth at a Utah trade show.
As this activity may subject an entity to nexus for either sales and use
tax or income tax or both, we will address the application of nexus for each
tax separately below.
You indicate that the following
activities would occur in Utah pursuant to your setting up a temporary booth at
a Utah trade show:
1. Operation of a temporary trade booth in
Utah for less than two weeks;
2. Promotion of goods (tangible personal
property), which would not include either the sale of goods, acceptance of
deposits, or approval or acceptance of orders;
3. Giving away catalogues;
4. Providing a stock of goods for display
only;
5. Having an employee drive a rental truck
in Utah and representing the company at the trade booth, but would not include
delivering orders or servicing, repairing, or installing equipment; and
6. Resolving
customer complaints.
Sales and use tax. You plan to operate the trade show booth
for less than two weeks. It is the
policy of the Commission not to apply sales and use tax nexus to trade show
participants who are in the state for less than two weeks, unless they have
some other contact with Utah that results in nexus or their trade show presence
in Utah is regular or systematic.
Please be advised that should you participate in various Utah trade
shows in a manner that would suggest regular or systematic presence, then sales
and use tax nexus with Utah may then exist.
Your participation in a trade show
for less than two weeks does not create sales and use tax nexus. Nevertheless, you should apply for a Utah
temporary sales tax license so you may report any sales made while in Utah at
the trade show. While you indicate that
no traditional sales will be made, Utah law recognizes your planned giveaway of
catalogues or other promotional items as a taxable event. Utah Admin. Code R865-19S-68 provides that
donors of tangible personal property, such as catalogues, are regarded as the
consumers of that donated property for use tax purposes. Accordingly, the sale of the catalogues to
you is a taxable event. If you have not
already paid sales tax on the items you give away, then you will need to
calculate a use tax based on the price you paid for those items and remit that
tax to Utah.
Income tax nexus. Utah Admin. Code R865-6F-6 indicates which
activities will subject an entity to nexus with Utah for purposes of its income
tax. Subpart (J) of this rule
recognizes Public Law 86-272, which restricts Utah from imposing an income tax
on a corporation whose only activity within the state is the solicitation of
sales for tangible personal property.
Subpart (K) lists activities that will subject an entity to income tax
nexus. Similarly, subpart (L) lists
activities that will not subject an entity to income tax nexus.
All but one of the activities
associated with your temporary booth, as listed above, are activities listed in
subpart (L) and thus do not expose an entity to nexus with Utah for its income
tax. However, that one activity, the
resolution of customer complaints, may or not may trigger income tax
nexus. Subpart (L)(12) allows you to
“mediate customer complaints when the purpose thereof is solely for
ingratiating the sales personnel with the customer and facilitating requests
for orders.” On the other hand, subpart
(K)(7) imposes income tax nexus on an entity for “investigating, handling, or
otherwise assisting in resolving customer complaints, other than mediating
direct customer complaints” in accordance with subpart (L)(12). We assume that no employee or agent of the
company will be available to resolve problems, which would subject your company
to income tax nexus. Advice offered at
the trade fair is not enough, by itself, to create nexus.
Though you have stated that you do
not plan to sell goods, accept deposits, or approve or accept orders, we point
out that should such activities occur, they would result in nexus for the Utah
income tax.
Please contact us if you have any
other questions.
For
the Commission,
Joe
B. Pacheco,
Commissioner
^^