Response
September 18, 1998
REQUEST
LETTER
NAME
COMPANY
September
18, 1998
Dear
Mr. Chapman,
As
per our phone conversation, I am requesting a clarification as to what the specific
requirements are for COMPANY and other suppliers in regard to charging and
collecting sales tax from our veterinarian clients.
1 - What
is COMPANY required to do if a veterinarian has on file with us a tax exempt
certificate and orders a product that he both consumes himself and also
dispenses and resells? Are we required
to charge sales tax on all the items and the veterinarian then deducts the tax
from his return on the products he resold or does he buy all of them tax exempt
and pay the taxes himself on the consumed items? Also what are the penalties for non-compliance for the supplier
and the veterinarian?
2- Are
there any circumstances that the veterinarian can have an account and purchase
everything on a tax-exempt basis and pay the sales tax on the products he
consumes?
3 Are
Universities, government agencies and non-profits such as humane societies
allowed to buy everything on a tax-exempt basis?
I
would appreciate a response as soon as possible so we can get this matter
settled quickly and correctly. If you
have any questions, please contact me at the number below.
Sincerely,
NAME
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October
13, 1998
NAME
COMPANY
RE: Sales Tax on Goods Purchased for Resale
Dear
NAME,
We have received your request for an
advisory opinion concerning your duties, as a supplier, to collect sales tax
when selling goods purchased for both resale and consumption. You have specifically asked three questions
concerning your sales to veterinarian clients. The first two questions concern
the resale exemption, the last question the exemption for government agencies
and other exempt entities. We shall
answer the questions separately below.
Question 1. You first ask what your company is required to do when the
veterinarian files an exemption certificate with you when placing an order for
goods that the veterinarian will both consume and also dispense and sell. Your duties concerning exemption
certificates are explained in Utah Admin. Code R865-19S-23 (copy
enclosed). Section (D) of that rule
does state that when the purchaser is unable to segregate the goods purchased
for resale from the goods purchased for his or her own consumption, then all
the goods should be purchased tax- free.
Then, the purchaser would report and pay the tax on the cost of the
goods that are later consumed.
You next ask what penalties exist
for the non-compliance of ones sales tax responsibilities. In addition to the taxes due, a
non-complying taxpayer is subject to penalties provided under Utah Code Ann.
§59-1-401, which include 10% penalties for failure to file tax returns and
failure to pay the sales tax.
Question 2. As stated above, when the purchaser is unable to segregate the
goods purchased for resale from the goods purchased for his or her own
consumption, then all the goods should be purchased tax-free.
Question 3. State universities and Utah and federal government entities
(including local government entities and public schools) are allowed to
purchase all goods tax-free upon presentation of an exemption certificate. As an alternative, section (C) of Rule
R865-19S-23 does allow the vendor to retain a copy of a purchase order, check,
or voucher in place of the exemption certificate.
For religious and charitable
institutions (including religious universities and schools), and other
non-profit entities that apply for and are issued a sales tax exemption number
by the Tax Commission by virtue of their federal-code 501(c)(3) status, Utah
Code Ann. §59-12-104.1(2) provides that these entities are exempt from sales
tax if the sale is made in the conduct of the entity’s regular activities. Subsection 104.1(2) further provides that,
for these entities, the exemption shall be honored at the point of sale if the
sale is in the amount of at least $1000 and the buyer presents an exemption
certificate. For sales under $1000,
sales tax shall be collected at the point of sale and the buyer shall apply to
the Tax Commission for a refund of the sales tax. However, should the sale be
made pursuant to a contract between the vendor and the exempted entity, the law
does allow the exemption to be applied at the point of sale whatever the amount
of the sale.
Please contact us if you have any
other questions.
For
the Commission,
Joe
B. Pacheco, CPA
Commissioner
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