Did an out-of-state seller create Utah sales-tax nexus by hiring a Utah call center to answer inbound calls from non-Utah customers and relay their orders?

Plain-English summary

Utah Private Letter Ruling 01-026 said an out-of-state seller did not create Utah sales-tax nexus merely by hiring a Utah call center to handle inbound calls from customers outside Utah and relay their orders.

The result depended on strict limitations. The call center did not solicit Utah customers, distribute catalogs or samples, ship goods, or handle Utah-originated orders.

The client had no Utah payroll or property, and the products were shipped from outside Utah.

The Commission warned that added Utah activities—such as marketing, processing returns, or keeping inventory—could create a duty to collect and pay sales tax.

The arrangement

A telemarketing company operated Utah call centers and answered inbound calls for multiple clients.

For the client at issue:

• Advertising produced by the client generated the calls.
• The Utah call center answered calls only from people outside Utah.
• Calls from Utah residents were diverted outside Utah.
• The call center took orders and transmitted them to the client.
• The client or another vendor shipped products from outside Utah.
• The call center did not own the client.
• The client had no Utah property or payroll.

Why the call center did not create nexus

The Commission compared the facts to a redacted U.S. Supreme Court case involving commissioned sales representatives or brokers.

In that case, the representatives received catalogs, samples, and advertising materials and actively solicited customers in the state.

The Utah call center did none of those things for Utah customers. It did not distribute the client's sales materials, and it handled only inbound contacts from people outside Utah.

The Commission therefore did not view the call center as a Utah representative actively attracting, soliciting, or obtaining Utah customers for the client.

Limited holding

Under the specific facts presented, the relationship with the Utah call center was not sufficient to impose Utah's sales and use tax laws on the client.

The Commission emphasized that the conclusion was limited. It identified facts that could change the result:

• The client or call center performed other Utah services, including marketing.
• Product returns were handled in Utah.
• The client maintained a stock of goods in Utah.

Those additional activities could make the client responsible for collecting and paying sales tax.

What this means for you

Remote sellers

This historical physical-presence analysis does not address modern economic-nexus thresholds. Evaluate current Utah requirements even if your in-state service provider performs only limited work.

Call centers and telemarketing companies

Document which customers are contacted, whether calls are inbound or solicited, what sales materials are used, and whether the center handles orders, returns, shipping, or inventory.

Accountants and tax professionals

The Commission's answer rested on both the client's lack of Utah property and payroll and the call center's narrow role. A single added in-state function could undermine the factual comparison.

Common questions

Q: Did hiring the Utah call center create sales-tax nexus?

A: No, under the limited facts presented.

Q: Did the call center solicit Utah customers?

A: No. Utah-originated calls were diverted outside the state, and the Utah center handled customers outside Utah.

Q: Did the call center ship products or hold inventory?

A: No. Products shipped from outside Utah, and the ruling said the client had no Utah property.

Q: What activities could change the result?

A: The Commission specifically mentioned other Utah services, marketing, product returns, and maintaining goods in Utah.

Q: Does this ruling resolve modern economic nexus?

A: No. It addressed the physical activities described in 2001, not later economic-nexus rules.

Key source language

• Representative role: “we do not consider COMPANY to be actively engaged in Utah as a representative of the client for the purpose of attracting, soliciting, and obtaining Utah customers.”
• Limited conclusion: “it does not appear, under these limited circumstances and under the facts presented, that your client’s relationship with COMPANY is sufficient to impose Utah’s sales and use tax laws on it.”
• Changed facts: “should your client perform any other services (i.e., marketing, product returns, etc.) or maintain a stock of goods in Utah, it would have responsibility for collecting and paying the sales tax.”

Citations and references

• Redacted U.S. Supreme Court case, shown in the official source only as “CASE, #### U.S. 207 (1960)”

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 01-026
• Date note: the source header identifies the response as November 14, 2001; the response dateline itself is redacted as “DATE.”
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

01-026

Response: 11/14/01

REQUEST LETTER

Dear Sir/Madam,

This is a request for an official opinion from your Department on whether one of our clients has nexus in your state for sales and use tax purposes and should collect sales tax on the sales of tangible personal property to customers in your state based on the facts set out below.

Following are the details of the nature of the business and the relationship with our client:

COMPANY is a telemarketing company who has been operating call __ centers within the State of Utah for over 12 years.

The inbound calls are driven from client-produced Direct Mail, Print, Radio or Television advertising.

Representatives from COMPANY answer inbound calls for multiple clients in a shared inbound environment.

The product offered or product literature would be shipped via the U.S. Postal Service or other overnight service. The product is always shipped from outside of Utah. The client or another other third party vendors would perform this. COMPANY only takes the order by phone and provides that information back to the client.

The calls coming into our Utah facilities would be inbound calls from persons who live outside of the State of Utah. Any telephone calls from any Utah resident would be diverted outside the State of Utah.

COMPANY is not owned by any of the companies we contract with for Telemarketing services.

The client has no payroll or property within your state .

Based upon the factual situation provided, we are requesting an advisory opinion as to whether the client has nexus in your state for sales and use tax purposes and should be collecting such tax from its customers. Please provide references to the applicable statutory authority, case law, or previous advisory opinions.

If you have any questions, or if additional information is needed, please contact NAME by phone at PHONE, email at E-MAIL, or at ADDRESS.

Thank you for your timely assistance in this matter.

Sincerely,

NAME

PHONE

RESPONSE LETTER

DATE

NAME

COMPANY

ADDRESS

RE: Advisory Opinion Is a client of COMPANY.

(�COMPANY�) subject to sales tax nexus with Utah?

Dear NAME,

COMPANY is a telemarketing company that operates call centers in Utah. You have inquired whether your client has sales tax nexus with Utah where it contracts with COMPANY to answer inbound calls concerning the sale of their product, take orders, and relay the orders back to it. COMPANY neither produces its client�s advertising nor participates in the shipping of the items sold. In addition, the client has no payroll or property in Utah, and all orders taken by COMPANY are shipped from outside of Utah. Lastly, any of the client�s Utah sales originate at call centers outside of Utah and are shipped into Utah from another state.

You indicate that your client contracts with COMPANY, a Utah company, to answer inbound calls placed by customers outside of Utah, take their orders, then transmit the orders to the client to process outside of Utah. In CASE , #### U.S. 207 (1960), the Supreme Court found that, under slightly different circumstances, a company that hired 10 sales representatives or brokers on a commission basis had sales and use nexus in the state where the brokers were located. However, in that case, the brokers were supplied catalogs, samples, and advertising materials and were actively engaged in soliciting customers from the state where the brokers were located. In your situation, the client does not supply COMPANY with catalogs, samples, or advertising materials to dispense to customers. COMPANY relays such requests back to the client to fill. Nor does COMPANY take orders or solicit clients that are located in the state where nexus is at issue, which in this case is Utah. Because of these differences, we do not consider COMPANY to be actively engaged in Utah as a representative of the client for the purpose of attracting, soliciting, and obtaining Utah customers. Accordingly, it does not appear, under these limited circumstances and under the facts presented, that your client�s relationship with COMPANY is sufficient to impose Utah�s sales and use tax laws on it. However, should your client perform any other services (i.e., marketing, product returns, etc.) or maintain a stock of goods in Utah, it would have responsibility for collecting and paying the sales tax.

Should you have any other questions, please contact us.

For the Commission,

Marc B. Johnson

Commissioner

MBJ/KC

01-026