98-077
Response
October 5, 1998
Attention Voluntary Disclosure Section
To Whom It May Concern:
I represent
a manufacturing business in Indiana with sales in your state. This company is
not currently registered with you. At the suggestion of Company counsel, an
opinion Is requested if registration is necessary. The Company has not
previously registered because it believes its sales are exempt from your
state's sales tax. My client manufactures equipment that is used by other
manufacturing businesses within your state. It is believed that your state
grants a manufacturing exemption for such transactions. Other pertinent
information about this business is as follows:
1) The
Company has no payroll or property within your state. All such items are
located in Indiana.
2) Sales
are solicited by independent manufacturers representatives who work on a
commission basis only.
3) Product
is shipped via common carrier from Indiana.
4) The
employees of the Company provide no installation, training or on site repair
services.
If
it is determined that the Company should register and pay taxes in your state,
such should be on a prospective basis. This would be on the basis of voluntary
disclosure, recognition of the prior exempt nature of the transaction and the
possibility that there is no
nexus. Thank you in advance for your cooperation
Very truly yours,
NAME
November
30, 1998
COMPANY
ADDRESS
RE: Advisory
Opinion - Nexus and Voluntary Disclosure Program
Dear NAME,
We
have received your request for an advisory opinion concerning your client, a
company (“Company”) which manufactures equipment and sells that equipment to
Utah manufacturing businesses. You ask
if the Company is required to register with the State of Utah for sales tax
purposes and, if so, how the Company may register under the Voluntary
Disclosure Program that the Tax
Commission has implemented.
Nexus
and Registration. Sales tax nexus
exists for the Company if it makes sales in Utah, unless the only activity
leading to those sales is advertising or solicitation by direct mail. Your letter states that the Company’s sales
are solicited by independent manufacturers’ representatives. As this activity is not either advertising
or solicitation by direct mail, the Company has acquired sales tax nexus with
Utah.
As the
Company has sales tax nexus with Utah, it is required to register with the
state for sales tax purposes and submit sales tax returns. You suggest that registration and filing of
returns may not be necessary if the Company’s only sales are for equipment
subject to Utah’s sales tax exemption for manufacturing equipment. This is not the case.
Utah
Admin. Code R865-19S-12(A) requires all persons responsible for collecting
sales and use tax to file a return with the Tax Commission whether or not sales
tax is due. Furthermore, Utah Admin.
Code R865-19S-23(A) requires a vendor selling tangible personal property to
customers exempt from sales tax to keep records (i.e., exemption certificates)
verifying the nontaxable status of those sales. Accordingly, the Company has
various reporting and record keeping duties, even if no sales taxes are due.
We should also point out that the
manufacturing equipment exemption is complex because of the difficulty of
determining if the equipment is used in new or expanding operations, as a
normal operating replacement, or for repair or maintenance. Depending upon its use, the equipment may or
may not be subject to the sales tax exemption for manufacturing equipment. Nevertheless, by retaining on file an
exemption certificate from the purchaser, you, as the vendor, may rely upon the
purchaser’s claim that the purchase is exempt and are protected should the
equipment later be deemed not to qualify for the exemption.
Voluntary
Disclosure Program. The Tax
Commission has approved a Voluntary Disclosure Program designed to help
businesses voluntarily resolve prior tax liabilities. Companies wishing to enter into the program may do so through
contact and exchange of information with the Voluntary Disclosure Program
staff. We are forwarding a copy of this
letter to the program staff to have them contact you concerning the Company’s
interest in entering the program.
Should you need it, the address and telephone number for the Voluntary Disclosure
Program are:
Auditing
Division, Nexus Division
Voluntary
Disclosure Program
Utah
State Tax Commission
210
North 1950 West
Salt
Lake City, UT 84134-2200
PH:
(801)297-4600
Please
contact us if you have any other questions.
For
the Commission,
Joe
B. Pacheco, CPA
Commissioner
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