Were an Internet seller's sales to overseas residents exempt from Utah sales tax when the goods were purchased in Utah and shipped outside the state?

Plain-English summary

Utah Private Letter Ruling 00-002 said an Internet seller's overseas sales were not subject to Utah sales tax if the seller had to deliver the goods outside Utah and used a common carrier.

The Commission treated those transactions as sales in interstate or international commerce.

But an overseas customer and an out-of-state destination did not automatically make a sale exempt. If the buyer or the buyer's representative received the goods in Utah, the transaction remained taxable even if the buyer later carried them outside the state.

The Commission also warned that a sale was not treated as interstate or international commerce if title passed in Utah and delivery was made other than by common carrier.

The seller's business and request

The requester described an Internet company selling household and grocery items to overseas residents.

It said the company had no sales in Utah or elsewhere in the United States and that all items were purchased online for locations outside Utah.

The company asked for confirmation that Utah sales tax did not apply to those overseas sales.

Rule for interstate and international sales

The Commission cited Utah Admin. Rule R865-19S-44.

Under that rule, a sale in interstate or international commerce was not subject to Utah sales tax.

The rule required more than a buyer's plan to transport Utah-purchased goods outside the state. Delivery to the buyer or the buyer's representative in Utah kept the transaction within Utah's tax base.

Three required elements

The ruling listed three requirements for an interstate or international sale:

1. The property had to move physically across the state line.
2. That movement had to be an essential, not incidental, part of the sale.
3. The seller had to be obligated by the sale terms to deliver the property across a state boundary to the buyer.

Assumed delivery facts

The request did not explain how the goods reached the overseas customers.

The Commission therefore presumed that the seller was required to deliver the goods outside Utah and used a common carrier.

On those assumed facts, the transactions qualified as interstate or international sales and were not subject to Utah sales tax.

When the sale would be taxable

The Commission gave two important limits:

• Delivery to the buyer or the buyer's representative in Utah was taxable even if the buyer intended to transport the goods outside Utah.
• If title passed in Utah and delivery was made other than by common carrier, the sale was not considered interstate or international commerce and was taxable.

Holding

Under the facts the Commission presumed:

• The seller had to deliver the goods outside Utah.
• A common carrier delivered the goods.
• The sales qualified as interstate or international commerce.
• Utah sales tax did not apply.

The answer depended on the actual delivery arrangement.

What this means for you

Internet sellers and exporters

An out-of-state or overseas customer does not by itself establish an exemption. Document the seller's contractual delivery obligation, destination, carrier, and passage of title.

Utah retailers

If the buyer takes delivery in Utah, the sale may remain taxable even when the buyer immediately transports the goods elsewhere.

Accountants and tax professionals

This ruling rested on facts the Commission had to assume because the request omitted delivery details. Confirm the actual shipping documents and current sourcing rules before applying its reasoning.

Common questions

Q: Were the overseas Internet sales taxable in Utah?

A: No, on the Commission's assumed facts. The seller had to deliver the goods outside Utah and used a common carrier.

Q: Was the customer's overseas residence enough to make the sale exempt?

A: No. The ruling focused on actual movement, the seller's delivery obligation, and how delivery occurred.

Q: What if the buyer received the goods in Utah?

A: The Commission said the sale was taxable even if the buyer intended to transport the goods outside Utah.

Q: Why did the Commission describe its answer as an assumption?

A: The request did not specify how the goods were delivered, so the Commission presumed required out-of-state delivery by common carrier.

Key source language

• Utah delivery: “If the goods are delivered to the buyer or the buyer=s representative in Utah, the sale is not in interstate or international commerce, even though the buyer is not a resident of Utah and intends to transport the goods outside of Utah.”
• Required delivery: “the seller must be obligated by the express or unavoidable implied terms of the sale, or contract to sell, to make physical delivery of the property across a state boundary line to the buyer.”
• Result on assumed facts: “your transactions would qualify as interstate or international sales and would not be subject to Utah tax.”

Citations and references

• Utah Admin. Rule R865-19S-44(A) and (B)

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 00-002
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

00-002

Response April 26,
2000

REQUEST LETTER

December 1, 1999

RE: Advisory Opinion on Sales Tax

Business Description:

COMPANY is an Internet commerce company that sells household and grocery items to over‑seas residents. The company has no sales within the state of Utah or even in the United States. All of the items are purchased over the Internet for locations outside of Utah. It is our opinion that under these circumstances no Utah State Sales Tax be assessed on our over‑seas sales.

Request:

We
would appreciate an advisory opinion related
to the handling of Utah State Sales Tax

for our company. If more information is needed to prepare the opinion you can contact

NAME.

Sincerely,

Michael Ricks, Accountant

RESPONSE LETTER

April 26, 2000

RE: Sales Tax Liability on Overseas Sales

Dear NAME,

COMPANY is an Internet commerce company that sells household and grocery items to overseas residents. You have requested that the Tax Commission issue an advisory opinion stating that Utah sales tax is not due on COMPANY transactions.

Utah Admin. Rule R865-19S-44(A) (ARule 44") provides that sales made in interstate commerce or, as is the case here, international commerce are not subject to Utah sales tax. However, the rule further provides that the mere fact that the goods purchased in Utah are transported out of Utah is not enough to constitute the transaction of a sale in interstate or international commerce. If the goods are delivered to the buyer or the buyer=s representative in Utah, the sale is not in interstate or international commerce, even though the buyer is not a resident of Utah and intends to transport the goods outside of Utah. In such a case, the sale is subject to Utah sales tax.

Section (B) of Rule 44 provides that before a sale qualifies as an interstate or international sale, the following must be complied with:

1. the transaction must involve actual and physical movement of the property sold across the state line;

2. such movement must be an essential and not an incidental part of the sale;

3. the seller must be obligated by the express or unavoidable implied terms of the sale, or contract to sell, to make physical delivery of the property across a state boundary line to the buyer;

You have not specified how the goods sold by COMPANY are delivered to the out-of-Utah purchasers. We will presume that you are required to deliver the goods outside of Utah and that you use a common carrier to deliver the goods. In this case, your transactions would qualify as interstate or international sales and would not be subject to Utah tax. However, if title to the goods passes in Utah and you deliver the goods other than by common carrier, the sale is not considered an interstate or international sale, and it is subject to Utah sales tax.

Please contact us if you have any other questions.

For the Commission,

Marc B. Johnson

Commissioner

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