Is a single-member LLC treated as a "person" and "vendor" that must collect and remit Utah sales and use tax, even though it's disregarded for federal income tax purposes?

Plain-English summary

A parent corporation planned to form a wholly owned Utah subsidiary organized as a single-member LLC (SMLLC) that would elect to be treated as a "disregarded entity" for federal income tax purposes — meaning the IRS looks straight through the SMLLC to its owner for federal income tax reporting. The subsidiary would buy tangible personal property for resale and sell or lease it to customers, including sales to its own affiliated corporations. The parent's counsel asked whether the SMLLC counted as a "person" under Utah's Sales and Use Tax Act (Title 59, Chapter 12) — and, notably, argued in favor of "person" status, because being a "person"/"vendor" was what let the SMLLC collect and remit sales tax properly on its transactions, including sales to affiliates.

The Commission agreed. Utah Code § 59-12-102(19) defines "person" with a list of entity types (individual, firm, partnership, corporation, trust, etc.) written in 1933 — decades before LLCs existed as a legal entity type, so SMLLCs obviously aren't named. But the Commission read the definition as intentionally broad rather than an exclusive list, citing the Utah Supreme Court's 1937 decision in Bird & Jex Co. v. Anderson Motor Co., which held that a court-appointed receiver — also not named in the statute — still qualified as a "person" because "a broad, general, inclusive, and all-embracing definition was intended." Applying that same reasoning, the Commission found an SMLLC qualifies as a "person," because Utah's LLC Act (Title 48, Chapter 2b) treats an LLC as a legal entity separate and distinct from its members, regardless of how the entity is taxed federally.

Because the SMLLC is a "person" that regularly sells and leases tangible personal property, it also meets the definition of "vendor" under § 59-12-102(33), and § 59-12-107 requires vendors regularly engaging in Utah sales/leasing activity to collect and remit sales tax — including on sales to its own affiliated entities. The Commission added an important caveat: the § 59-12-102(19) "person" definition only controls within Chapter 12 (sales and use tax). Other Utah Code chapters using the word "person" — like § 59-1-302(2)'s personal penalty provision for parties who fail to collect and remit tax — could reach beyond the entity itself to individual officers, members, or employees, even if the entity properly collecting the tax is an SMLLC.

What this means for you

Parent companies forming single-member LLC subsidiaries in Utah

Don't assume a disregarded-entity federal tax election changes your Utah sales tax obligations. The SMLLC is its own "person" and "vendor" for Utah sales tax purposes and must collect and remit tax on its taxable sales — including sales to its own parent or sister companies — regardless of how it's treated for federal income tax.

Businesses selling to affiliated entities through an LLC structure

Intercompany transactions aren't automatically exempt just because the buyer and seller share ownership. If the SMLLC seller is a "vendor" making a taxable sale or lease, sales tax applies to that transaction the same as any third-party sale, unless a specific exemption applies.

Accountants and tax professionals advising on entity structuring

Keep the Chapter 12 "person" definition separate from other Utah Code uses of "person." An SMLLC properly collecting sales tax as the Chapter 12 "person"/"vendor" doesn't necessarily shield its officers, members, or employees from personal liability under other provisions, like the § 59-1-302(2) personal penalty for uncollected/unremitted tax.

Common questions

Q: Does a single-member LLC's "disregarded entity" federal tax status affect its Utah sales tax obligations?
A: No. Federal disregarded-entity treatment doesn't change the SMLLC's status as a separate "person" and "vendor" under Utah's sales and use tax law.

Q: Are sales between affiliated companies through an SMLLC taxable?
A: Yes, if the SMLLC is a vendor making a taxable sale or lease — affiliation alone doesn't create an exemption.

Q: Why does an old (1933) statutory definition of "person" cover a modern entity type like an LLC?
A: The Commission read the definition as intentionally broad and non-exclusive, following a 1937 Utah Supreme Court case that included a receiver (also unnamed in the statute) within "person." The same reasoning extends to LLCs and SMLLCs, entity types that didn't exist when the statute was written.

Q: Could an SMLLC's owner or officer be personally liable for uncollected sales tax?
A: Possibly, under a different Utah Code provision (§ 59-1-302(2)) governing personal penalties, which the Commission noted may reach individuals even when the "person" collecting the tax under Chapter 12 is the SMLLC itself.

Q: Can I rely on this ruling for my own SMLLC's tax status?
A: No — it binds the Commission only for the taxpayer and facts described. Confirm your own entity's classification and collection obligations with the Commission or a Utah tax professional.

Citations and references

Statutes and case law cited:

• Utah Code Ann. § 59-12-102(19) (definition of "person")
• Utah Code Ann. § 59-12-102(33) (definition of "vendor")
• Utah Code Ann. § 59-12-107 (vendor sales tax collection and remittance obligation)
• Utah Code Ann. § 59-1-302(2) (personal penalty for uncollected/unremitted tax)
• Utah Limited Liability Company Act, Title 48, Chapter 2b (LLC as separate legal entity)
• Bird & Jex Co. v. Anderson Motor Co., 92 Utah 493, 69 P.2d 510 (1937) (broad, non-exclusive reading of "person")

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original PDF: https://files.tax.utah.gov/tax/commission/ruling/01-009.pdf

Original ruling text

REQUEST LETTER

01-009

Response May 18, 2001

COMPANY

ADDRESS

We are writing on behalf of our client, hereinafter referred to as COMPANY to request an advisory opinion regarding the issue identified below. We are aware that the Utah State Tax Commission (the "Commission") recently published an advisory opinion that indicated that the Commission is currently evaluating the issue as stated, and anticipates providing further guidance on the issue to taxpayers in the future. Utah State Tax Commission Advisory Opinion 99-024 (May 12, 1999). As we are unaware of any further guidance published by the Commission on the issue, we respectfully request your consideration of the issue at this time. As part of our request, we have included the factual background and our analysis of the issue.

ISSUE:

Is a Single Member Limited Liability Company (hereinafter referred to as "SMLLC") a "person" for purposes of Chapter 12 of Title 59 of the Utah Code Ann. ("UCA").

CONCLUSION:

A SMLLC is a "person" as defined in UCA Section 59-12-102(19). The statute, in pertinent part, defines a person as an "individual, firm, partnership, joint venture, association, corporation, estate, trust, business trust, receiver, [or] syndicate . . . or any group or combination acting as a unit." UCA Section 59-12-102(19). While this definition of "person" does not specifically refer to a limited liability company or a SMLLC, the statute writers intended to include all separate legal entities existing at the time of the enactment of Title 59, Chapter 12 of the UCA, (1933) in its definition of "person," including by inference a SMLLC. The Utah Limited Liability Company Act (Title 48, chapter 2b of the UCA) was enacted by law in 1991. These statutes provide that a limited liability company is separate and distinct from its owners, and is recognized in all respects as a separate legal entity. As a separate legal entity, a SMLLC is a "person" for Utah sales and use tax purposes.

Based upon the facts as stated and upon our analysis, as a "person," a SMLLC must collect and remit sales and use tax on taxable sales or lease transactions, including taxable transactions with affiliated entities.

BACKGROUND:

Company X is considering the formation of a wholly owned subsidiary, COMPANY. COMPANY will be organized as a SMLLC, and will elect to be treated as disregarded entity for federal income tax purposes under Treasury Regulation Section 301.7701-1 through 301.7701-3. COMPANY will have a Federal Employer Identification Number separate from its parent and brother/sister corporations ("affiliated corporations"). COMPANY will register to do business in Utah.

The operations of COMPANY will consist of purchasing tangible personal property for resale and then selling or leasing the property to its customers. COMPANY will collect and remit the applicable state sales tax on the taxable sales or leases of tangible personal property to its customers, including sales to affiliated corporations. To the best of our knowledge the issues involved in this request are not subject to an existing audit, protest, appeal, or litigation concerning our client.

ANALYSIS:

In support of our conclusion in this matter we submit the following for your consideration:

While Chapter 12 of Title 59 of the UCA does not specifically address the classification of a SMLLC for sales and use tax purposes, through other pertinent sections found in Chapter 12 and other areas of the UCA, one can infer that a SMLLC will be treated as a separate entity or "person."

UCA Section 59-12-102(19) provides, in pertinent part:

"Person" includes any individual, firm, partnership, joint venture, association, corporation, estate, trust, business trust, receiver, syndicate, this state, any county, city, municipality, district or other local governmental entity of the state or any group or combination acting as a unit.

Chapter 12 was enacted by into law in 1933. Based on legislative history, the definition of "person" under this Chapter has not been amended since enactment in 1933. Through the definition of "person" cited above, the statute writers attempt to include all types of entities existing at the time of enactment, including, individuals, corporations or any group or combination acting as a unit. Because limited liability companies did not exist as an entity type at the time of the enactment of Chapter 12, limited liability companies were not directly referred to in the definition of "person." However, one can infer that the definition of "person" under UCA 59-12-102(19) includes limited liability companies, SMLLCs, S corporations and other legal entity types acting as individuals, corporations or groups or combinations acting as a unit.

The statutes governing the formation and organization of limited liability companies, including SMLLCs, were enacted into law in 1991 and are found under the Utah Limited Liability Company Act, Title 48 Chapter 2b of the UCA. The Utah Limited Liability Company Act states that a "person" means an individual, general partnership, limited partnership, limited liability company, limited association, domestic or foreign trust, estate, association, or corporation. UCA Section 48-2b-102(6). Under this statute, a SMLLC is included as a "person." In addition, the clear intent of the Utah Limited Liability Company Act is to establish that a limited liability company is separate and distinct from its member or members, managers or employees.

Specifically, UCA Section 48-2b-109(1) provides, in pertinent part, that:

neither the members, the managers, nor the employees of a limited liability company are personally liable under a judgment, decree, or order of a court, or in any other manner, for a debt, obligation, or liability of the limited liability company.

In addition, UCA Section 48-2b-119 provides that the limited liability company is required to maintain separate records from its members; and, UCA Section 48-2b-113 provides that any process against a limited liability company is served to the limited liability company in accordance with Title 16, Chapter 10a, Utah Revised Business Corporation Act, as if the company were a corporation, and not to the individual member or members.

Based on the facts and the analysis, COMPANY, a SMLLC, should be recognized as a separate legal entity and be included as a "person" under UCA Title 59, Chapter 12. While COMPANY should be considered a "person," COMPANY should also be classified as a "vendor" under Chapter 12 of Title 59 of the UCA.

UCA Section 59-12-102(33) provides, in pertinent part,

(a) Vendor means:

(i) any person receiving any payment or consideration upon a sale of tangible personal property . . . and

(ii) any person who engages in regular or systematic solicitation of a consumer market . . .

UCA Section 59-12-107 provides, in pertinent part that each vendor is to collect and remit sales tax if the vendor regularly engages in any activity in connection with the leasing or servicing of property located within the state. Therefore, as a vendor, COMPANY should be required to collect and remit sales and use tax on the sale and/or lease of tangible personal property to end users.

SUMMARY:

In summary, we request that the Commission rule that a SMLLC be considered a "person" under Title 59 Chapter 12 of the UCA. Based on your ruling in this manner, COMPANY would be considered a "person" under Title 59, Chapter 12 of the UCA, and as a "person" be required to collect and remit sales and use tax on taxable transactions with its customers, including transactions with affiliated entities.

Should you be inclined to rule to the contrary on this matter, we request the opportunity to meet with you and further discuss the issue. Your cooperation in this matter is very much appreciated.

Sincerely yours,

NAME

Manager State and Local Tax

RESPONSE LETTER

DATE

NAME

ADDRESS

RE: Advisory Opinion - Single Member Limited Liability Company (SMLLC)

Dear NAME,

We have received your request for an advisory opinion concerning your client, an SMLLC, and whether such an entity is considered a "person" under Utah's Sales and Use Tax Act (Title 59, Chapter 12 of the Utah Code). For purposes of this chapter, a "person" is defined in Utah Code Ann. Section 59-12-102(19) and:

includes any individual, firm, partnership, joint venture, association, corporation, estate, trust, business trust, receiver, syndicate, this state, any county, city, municipality, district, or other local governmental entity of the state, or any group or combination acting as a unit.

While the list of entities in this definition does not specifically include an SMLLC, the Tax Commission does not view the definition limited only to the listed entities. The Utah Supreme Court has previously addressed whether the definition of "person" for purposes of Utah's sales tax should be broadly or narrowly interpreted in Bird & Jex Co. v. Anderson Motor Co., 92 Utah 493, 498, 69 P.2d 510 (1937). The definition of "person" that the Court considered (as found in Section 5 of the Emergency Revenue Act of 1933 (chapter 63), as amended by the Second Special Session of the Legislature in 1933, c. 20) was similar to the present law and read:

The term 'person' includes any individual, firm, copartnership, joint adventure, corporation, estate or trust, or any group or combination acting as a unit and the plural as well as the singular number unless the intention to give a more limited meaning is disclosed by the context.

At issue for the Court was whether a receiver authorized to conduct the business of the motor company was a "person," even though the statute did not include "receiver" among the entities listed as such. The Court concluded that receivers, trustees, executors, and others in fiduciary capacities were included in the definition, stating that "[f]ar from an exclusive definition, a broad, general, inclusive, and all-embracing definition was intended." The Tax Commission believes this same reasoning applies to the current definition of "person." Accordingly, the Tax Commission finds that your client, as an SMLLC, is considered a "person" under Title 59, Chapter 12 of the Utah Code, and, as such a "person," is required to collect and remit sales and use tax on taxable transactions, including transactions with affiliated entities.

We should point out, however, that the definition of "person" under Section 59-12-102(19) applies only to the statutes found in Chapter 12 of Title 59. The term "person," as used in other chapters of the Utah Code, may have different implications. For example, Utah Code Ann. Section 59-1-302(2) imposes a personal penalty, under certain circumstances, on any "person" who does not collect and remit taxes that are due. Even should the Title 59, Chapter 12 "person" that collects and remits sales and use tax be a corporation, LLC or SMLLC, the Tax Commission may conclude that a "person" for purposes of imposing the Section 59-1-302 personal penalty may include not only the corporation, LLC, SMLLC, but also an officer, member, or employee of such entities, or other responsible parties.

Please contact us if you have any other questions.

For the Commission,

Pam Hendrickson

Commission Chair

PH/KC

01-009