99-0019 Response March 2, 2000

 

 

REQUEST LETTER

 

99‑019

 

Date: February 3, 1999

 

Dear NAME:

 

We are a STATE corporation and are usually not subject to the taxes or fees you have indicated. COMPANY is not adoing business@ as defined in the public Law 86-272 in your locale. We have traveling salespeople who may solicit orders from schools in your area, but they do not maintain an inventory, approve sales, handle returns or replacements, receive payments or pursue collections. All orders are approved, processed and shipped from our headquarters in STATE. Consequently, COMPANY has not established nexus with your locale. Our sole "place of business" for tax purposes is in CITY, STATE.

 

As a service to our customer organizations we maintain sales tax registration in all states which we operate. We do not report our sales to the school/resellers on our sales tax return, but we do report subsequent resales of our products and have them collect the tax and remit it to us; we in turn remit it to your state. We do this solely as a service to our customer schools, because many are unable to provide a valid resale certificate and they may be incurring a sales tax liability on their fund raising sales of our products. This reporting on the schools= behalf is why the DOR has identified COMPANY as doing business within the corporate limits of your city.

 

Because we do not have sufficient activities in your jurisdiction to be considered "doing business" and because our activities there do not establish nexus, we are not required to file the returns or pay the taxes or fees that you have requested.

 

If you have any questions, please call NAME at NUMBER. Thank you.

 

Sincerely,

NAME

Staff Accountant

 

 

RESPONSE LETTER

 

 

March 2, 2000

 

NAME

ADDRESS

 

RE: Income Tax Nexus for Institutional Financing Services (COMPANY)

 

Dear NAME,

 

We have been forwarded your letter by Auditing Division, which has asked us to issue an advisory opinion as to whether COMPANY has nexus with Utah for income tax purposes. Your company conducts business in Utah, and by so doing, has income tax nexus with Utah. However, you mention in your letter that your company=s employees who visit Utah do not conduct any activities in Utah that extend beyond those activities protected under Public Law 86-272. If this is true, COMPANY is not subject to income tax liability in Utah because of the protection offered by Public Law 86-272.

 

To determine if your company=s activities in Utah exceed the protection offered under Public Law 86-272, we must consider all the facts concerning these activities. You mention in your letter that you have schools or OTHER COMPANYs@ in Utah that collect Utah sales tax and remit it to COMPANY. COMPANY then remits the sales tax to Utah by filing a Utah sales tax return. From this, one could infer that the Utah schools or resellers may be representatives of your company who collect payment on your behalf in Utah, then remit it to your company headquarters in STATE. The performance of such an activity in Utah by a representative on your behalf would go beyond the mere solicitation of sales and would not be a protected activity under Public Law 86-272. Under these circumstances, it would subject COMPANY to nexus with Utah for income tax purposes.

 

Nevertheless, in subsequent conversations between Auditing Division and COMPANY, COMPANY has indicated that the Utah schools or resellers are not acting on its behalf or as its representatives. Apparently, COMPANY sells its books to the Utah schools or resellers at wholesale and only through activities protected under Public Law 86-272. The Utah schools or resellers then sell the books at retail to the final customers, then remit to COMPANY both the wholesale price that was charged by COMPANY and the sales tax collected by the Utah schools or resellers on the retail sale. COMPANY then remits to the state of Utah this total sales tax that was collected and remitted by the Utah schools or resellers. The Commission believes the collection of sales tax under these circumstances, as a courtesy to teachers and schools, is incident to the mere solicitation of sales. Accordingly, this activity falls under the protection of Public Law 86-272, and COMPANY is not liable for Utah income taxes. However, if the facts of this situation are otherwise, our response may be different.

 

Please contact us if you have any other questions.

 

For the Commission,

 

Marc B. Johnson

Commissioner

 

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