98-082

Response January 20, 1999

REQUEST LETTER

November 13, 1998

In RE: Request for Nexus Ruling

Dear Mr. Chapman:

This is a request for an official opinion or ruling from your Department on whether our client has nexus in your state for sales and use tax purposes and should collect sales tax on the sale of newsletters to customers in your state based on the facts set out below.

FACTS

The client, herein referred to as LLC, is a limited liability company organized and headquartered in Tennessee. All of LLC's property and employees are located in the state of Tennessee. LLC has no sales solicitation outside the state of Tennessee except via mail and telemarketing.

LLC publishes legal newsletters for distribution in various states. The content of each newsletter is specific to the state of distribution and specific to certain law, i.e. employment or environmental law. LLC contracts with a law firm in your state to perform research and contributes editorial content to the newsletter sold via wail and telemarketing into your state. The law firm in your state has no other relationship with LLC and performs no ancillary function relating to the publication, sale or distribution of the newsletters in your state.

The newsletters, as stated earlier, are sold by mail subscription, published in Tennessee and distributed from Tennessee via U.S. mail to customers located in your state. All activities related to the sale, distribution and billing of the newsletters are performed at LLC's headquarters located in Tennessee.

Based upon the factual situation provided, we are requesting an Administrative Ruling as to whether LLC has nexus in your state for sales and use tax purposes and should be

collecting such tax from its subscription customers.

Your ruling should provide references to the applicable statutory authority, case law or previous Administrative Rulings used to support such.

We appreciate your assistance in this matter. If you have any questions or find the need for additional information, please contact NAME #####.

Very truly yours,

RESPONSE LETTER

January 20, 1999

RE: Advisory Opinion - Sales Tax Nexus

Dear NAEM,

We have received your request for an advisory opinion as to whether your client, referred to as LLC, has sales tax nexus with Utah. Two connections between your client and Utah are set forth in your letter. Let us discuss these activities separately.

First, LLC sells newsletter subscriptions to customers in Utah. You state that the newsletter subscriptions are solicited only via the mail or telemarketing, with the newsletters published and distributed from Tennessee via the U.S. Mail. For purposes of this opinion, we assume that all solicitation of sales occurs outside of Utah and that none of the telemarketing calls originate or are routed to a telephone service located in Utah. Although Utah Code Ann. '59-12-107(1)(a)(iii) provides that an activity as described above does subject an entity to sales tax nexus with Utah, the U.S. Supreme Court has held otherwise. The Court found in National Bellas Hess Inc. v. Dep=t of Revenue, 386 U.S. 753 (1967), that when an entity=s only contact with a state is through an activity as described above, then that entity is not subject to sales tax nexus with that state. Accordingly, this activity alone does not subject LLC to sales tax nexus with Utah.

LLC=s second activity in Utah consists of its contract with a Utah law firm to perform research and contribute editorial content for the newsletters that are then sold to Utah customers. We feel that this contract with a Utah entity is Asignificantly associated with [LLC=s] ability to establish and maintain a market@ in Utah for its sales, and as such, could subject LLC to sales tax nexus under the guidelines of Tyler Pipe Industries, Inc. v. Washington Dept. Of Rev., 483 U.S. 232 (1987). However, even though sales tax nexus may be constitutionally applied to an entity because of its activities, statutory authority to impose nexus must also exist. The Utah State Legislature has specifically detailed in Section 59-12-107 those activities that statutorily subject an entity to sales tax nexus with Utah. An activity such as LLC=s contracting with the Utah law firm as set forth above is not among those found in that section. Accordingly, Utah law does not impose sales tax nexus on LLC because of this second activity in Utah.

In summary, neither activity as described above would impose sales tax nexus with Utah upon LLC. However, should your contacts with Utah be different from those described in your letter, we might reach a different conclusion. Please contact us if you have any other questions.

For the Commission,