Does having one remote, non-sales employee working from a home office in Utah force an out-of-state online retailer to collect Utah sales tax?
Plain-English summary
Despite its "nutritional supplements" title, this ruling is really about sales-tax nexus — what it takes for an out-of-state online seller to become responsible for collecting Utah tax. The supplements are just ordinary taxable goods; the real question is about an employee.
An out-of-state company sold nutritional supplements and health foods online and by catalog into many states, including Utah. It had no Utah office, no inventory, no salespeople — it reached Utah customers only through its website and mailed catalogs, and shipped everything in by common carrier. Then it hired one Utah resident, a "Director of Innovation," who telecommutes from her own home doing research and development. She doesn't sell, take orders, solicit, advertise, or hold stock; her home isn't held out as a company office. The company asked the Commission to confirm that this one remote, non-sales employee doesn't trigger a Utah collection obligation.
The Commission concluded the opposite: the company must collect and remit Utah sales tax, for two independent reasons:
-
It "utilizes... an office or similar place of business" in Utah (§ 59-12-107(2)(a)(i)). By having an employee regularly telecommute from her in-home office, the company uses a place of business in Utah — and this is true even though the home isn't advertised or held out to the public as a company office.
-
It loses the internet/mail-only exception (§ 59-12-107(2)(a)(iii)). A seller that "regularly solicits orders" in Utah must collect tax unless its only Utah activity is advertising or solicitation by direct mail, email, the internet, or similar means. Because the company also has an employee doing R&D work in Utah, its Utah activity is not limited to solicitation — so the exception is unavailable.
This is a physical-presence nexus ruling. The decision came down in August 2018, just weeks after the U.S. Supreme Court's Wayfair decision opened the door to taxing remote sellers with no physical presence — but the Commission expressly noted it didn't need Wayfair (or Utah's economic-nexus trigger statute, § 59-12-103.1) here, because the in-state employee already gave the company old-fashioned physical-presence nexus. The taxpayer's reliance on Quill (the pre-Wayfair physical-presence case) didn't help, because it had physical presence.
Two more points the Commission made:
- Sourcing: the company's retail sales are sourced to where the Utah customer takes receipt of the goods (§ 59-12-211(3)) — ordinary destination sourcing — and taxed there.
- Use tax: the company also owes Utah use tax (§ 59-12-107(2)(e)) on tangible personal property it stores, uses, or consumes in Utah — for example, the catalogs it mails into the state and supplies used at the home office — if its own vendors didn't already collect tax.
- Prospective only: collection was required starting 30 days after the ruling, not retroactively.
What this means for you
Out-of-state online and catalog sellers with any remote worker in a state
This is the headline: one remote employee can create sales-tax nexus — even if they never touch sales. A telecommuting engineer, designer, R&D, customer-success, or back-office worker counts. The "we only reach customers by website and mail" safe harbor evaporates the moment you have an in-state employee doing anything beyond advertising/solicitation. If you have remote staff scattered across states, assume you may have a collection obligation in each of those states and check.
Remote-work and HR-driven nexus
The trigger here wasn't a sales decision — it was a hiring decision. The home office was nexus-creating even though it wasn't public-facing, on letterhead, or marked with a sign. Companies that went remote-first should treat "where do our employees physically work?" as a tax-compliance question, not just an HR one. Where your people sit can be more consequential than where your servers or warehouses are.
Physical presence still matters after Wayfair
Wayfair added economic nexus (you can owe tax based on sales volume with no physical presence), but it didn't erase physical-presence nexus — it sits on top of it. An employee, office, inventory, or in-state activity still independently creates a collection duty. Don't assume the only nexus test now is the dollar/transaction threshold.
Accountants and multistate tax professionals
Clean application of Utah's pre-Wayfair physical-presence rules in § 59-12-107(2)(a): subsection (i) (place of business, satisfied by a telecommuter's home) and subsection (iii) (the advertising/solicitation-only exception, lost once in-state activity exceeds solicitation). The Commission didn't reach the affiliate/"related seller" test in (2)(b) or the economic-nexus statute (§ 59-12-103.1) because physical presence was dispositive. Contrast Utah PLR 21-001, where a remote seller with no Utah presence had nexus purely on economic thresholds (over \$100k / 200+ transactions) — the two rulings together map both halves of Utah's nexus framework: physical presence (17-005) and economic presence (21-001).
Common questions
Q: We're an out-of-state online seller with one remote employee in Utah who doesn't sell anything. Do we have to collect Utah sales tax?
A: Per this ruling, yes. A non-sales employee regularly working from a Utah home office means the company "utilizes... an office or similar place of business" in Utah (§ 59-12-107(2)(a)(i)), which creates a collection-and-remittance obligation — regardless of the employee's job function.
Q: Our only Utah marketing is the website and mailed catalogs. Doesn't that exempt us?
A: Only if that solicitation is your only Utah activity. The exception in § 59-12-107(2)(a)(iii) covers advertising and internet/mail solicitation — but once you also have an employee doing other work in the state, the exception no longer applies and you must collect.
Q: The employee's home isn't a public office — no sign, no business cards. Does that save us?
A: No. The Commission said the conclusion "does not change even if the Company does not hold out the in-home office to the public as a place of business." Regular telecommuting from the home is enough.
Q: This was decided right after Wayfair. Did economic nexus drive the result?
A: No. The Commission relied on physical-presence nexus (the in-state employee) and expressly said it didn't need to analyze Wayfair or Utah's economic-nexus trigger statute (§ 59-12-103.1). Physical presence was enough on its own.
Q: Besides collecting sales tax, do we owe anything else?
A: Yes — use tax (§ 59-12-107(2)(e)) on tangible personal property you store, use, or consume in Utah (such as catalogs you mail into the state and supplies used at the home office) if your vendors didn't already charge tax on them.
Q: Can we rely on this ruling?
A: Not as binding. A Utah private letter ruling binds the Commission only for the taxpayer and facts it was issued to; its weight for anyone else depends on how closely the facts match.
Citations and references
Statutes (Utah Code Ann.):
- § 59-12-107(2)(a)(i) — a seller that has or utilizes an office or similar place of business in Utah must pay or collect and remit the tax (satisfied by an employee's in-home office)
- § 59-12-107(2)(a)(iii) — a seller that regularly solicits orders must collect unless its only Utah activity is advertising or solicitation by direct mail, email, internet, or similar means
- § 59-12-107(2)(b) — "related seller"/affiliate-nexus test (not reached)
- § 59-12-107(2)(e) — duty to pay use tax on TPP/products stored, used, or consumed in Utah when the seller didn't collect
- § 59-12-103(1)(a), (1)(l) — tax on retail sales of TPP and on TPP stored/used/consumed in Utah
- § 59-12-103.1 — collection trigger if the U.S. Supreme Court or Congress authorizes taxing remote sellers (not reached)
- § 59-12-211(3) — general TPP sales sourced to where the purchaser takes receipt
- § 59-12-102(124), (136) — definitions of "storage" and "use"
Case law:
- South Dakota v. Wayfair, Inc., 585 U.S. ___ (2018) — economic nexus for remote sellers (noted as unnecessary to the result)
- Quill Corp. v. North Dakota, 504 U.S. 298 (1992) — former physical-presence rule cited by the taxpayer
Rule: Utah Admin. Code R861-1A-34 (private letter ruling procedure and appeal rights)
Source
- Landing page: Utah State Tax Commission — Private Letter Rulings
- Original PDF: 17-005.pdf
Original ruling text
FINAL PRIVATE LETTER RULING
REQUEST LETTER
17-005
June 30, 2017
VIA CERTIFIED MAIL
AND EMAIL TO [email protected]
Office of the Commission
Utah State Tax Commission
210 N 1950 W
Salt Lake City, UT 84134
Re: Request for Private Letter Ruling Pursuant to UT ADC R861-
1A-34 to on Behalf of COMPANY.
To the Commissioners:
On behalf of COMPANY. (“COMPANY”), COMPANY-2 requests a private letter
ruling, pursuant to UT ADC R861-1A-34, as to whether COMPANY is a seller “within the state”
under Utah Code § 59-12-107(2)(a) or a seller considered to be engaged in the business of selling
tangible personal property, a service, or a product transferred electronically for use in the state
under Utah Code section 59-12-107(2)(b), and is, therefore, required to collect and remit sales
and use tax on sales to Utah customers.
The subject of this request is not currently a concern in any administrative matter before
the Utah State Tax Commission and is not currently an object of any litigation involving
COMPANY.
Brief Statement of Facts
COMPANY is incorporated and headquartered in STATE-1, [WORDS REMOVED].
COMPANY sells nutritional supplements and health foods online from COMPANY’s website
and through COMPANY’s catalogs to customers in ##### states, including Utah.
COMPANY does not have any permanent or temporary locations (an office, a
distribution house, a sales house, a warehouse, a service enterprise, or other similar place of
business) in Utah, and it does not engage in activities related to the leasing and/or servicing of
property located within the state. COMPANY does not maintain a stock of goods in Utah.
COMPANY also does not have any representatives, agents, salespersons, canvassers,
independent contractors, or solicitors operating in the state for the purpose of selling, delivering,
installing, assembling or taking orders for COMPANY. Indeed, COMPANY does not regularly
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solicit orders in the state, other than by and exclusively through solicitation by the Internet and
catalogs. COMPANY products are transported and delivered to customers via common carrier
from distribution centers, all of which are located outside Utah. Moreover, COMPANY does not
hold a substantial ownership interest in, and is not owned in whole or in substantial part by, a
related seller. Because COMPANY has not had any locations or representatives in Utah, it has
not collected sales or use tax on its sales to Utah customers, and it has not held a Utah sales or
use tax permit.
In MONTH YEAR, COMPANY hired a research and development employee who is a
resident of Utah. This employee (whose title is “Director of Innovation”) telecommutes from her
in-home office in Utah. She does not solicit sales or orders; she does not maintain a stock of
COMPANY goods; she does not take customer orders or otherwise service customer accounts
for COMPANY; and she does not engage in leasing or servicing property located in Utah on
behalf of COMPANY. Rather, her work is directed towards the innovation and improvements of
health food and other nutritional products for the company. Her in-home office is not held out to
the public as an office or other permanent or temporary place of business for COMPANY, and
she does not advertise or promote her home as a place of business for COMPANY (e.g., through
a sign, letterhead, or business card). In short, COMPANY does not have a Utah location, stock or
a sales representative within the state; however, it seeks confirmation from the Commission in
this request that the presence of its R&D developer working in a non-sales role from her in-home
office in Utah will not trigger any sales or use tax collection obligations on sales to
COMPANY’s Utah customers.
Requested Written Advice
COMPANY requests written advice from the Commission on the following questions:
Under Utah Code section 59-12-107, is COMPANY a seller “within the state” or a seller
required to “pay or collect and remit sales and use taxes” solely because of the presence of its
R&D developer in the state, who has a non-sales role and works from her in-home office? Is
COMPANY required to collect and remit Utah sales or use taxes under any other Utah statute on
these facts?
Relevant Law and Analysis
It does not appear that the Commission has previously opined on facts analogous to the
facts here. The relevant statutory provisions governing whether a COMPANY must collect sales
and use tax are Utah Code sections 59-12-107(2)(a) and (2)(b).
Utah Code section 59-12-107(2)(a) provides that a seller must pay or collect and remit
sales and use taxes if within the state the seller:
(i) has or utilizes: (A) an office; (B) a distribution house; (C) a sales house; (D) a
warehouse; (E) a service enterprise; or (F) a place of business similar to Subsections
(2)(a)(i)(A) through (E);
(ii) maintains a stock of goods;
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(iii) regularly solicits orders, regardless of whether or not the orders are accepted in the
state, unless the seller's only activity in the state is: (A) advertising; or (B) solicitation by:
(I) direct mail; (II) electronic mail; (III) the Internet; (IV) telecommunications service; or
(V) a means similar to Subsection (2)(a)(iii)(A) or (B);
(iv) regularly engages in the delivery of property in the state other than by: (A) common
carrier; or (B) United States mail; or
(v) regularly engages in an activity directly related to the leasing or servicing of property
located within the state.
Utah Code section 59-12-107(2)(b) provides that a seller is considered to be engaged in
the business of selling tangible personal property, a service, or a product transferred
electronically for use in the state, and shall pay or collect and remit the sales and use taxes
imposed by this chapter if:
(i) the seller holds a substantial ownership interest in, or is owned in whole or in
substantial part by, a related seller; and
(ii)(A) the seller sells the same or a substantially similar line of products as the related
seller and does so under the same or a substantially similar business name; or (B) the
place of business described in Subsection (2)(a)(i) of the related seller or an in state
employee of the related seller is used to advertise, promote, or facilitate sales by the seller
to a purchaser.
“Related seller” is defined as a seller that:
(i) meets one or more of the criteria described in Subsection (2)(a)(i); and
(ii) delivers tangible personal property, a service, or a product transferred electronically
that is sold: (A) by a seller that does not meet one or more of the criteria described in
Subsection (2)(a)(i); and(B) to a purchaser in the state.
Id. § 59-12-107(1)(b).
COMPANY’s R&D developer is a non-sales employee who does not sell, deliver, install,
assemble, or take orders with respect to any goods within Utah, and does not solicit orders and or
advertise in the state. Furthermore, as noted above, COMPANY does not have any other
employees, representatives, or other persons in the state for the purposes of soliciting, selling,
delivering, installing, assembling, or taking orders with respect to goods sold by COMPANY.
Moreover, COMPANY’s R&D developer home office is not a place of business for COMPANY,
COMPANY does not have any other permanent or temporary location within the state that could
be regarded as a “place of business” for COMPANY, and COMPANY does not lease or service
property located within Utah. COMPANY and COMPANY’s R&D developer also do not
maintain a stock of goods in Utah. Accordingly, because COMPANY does not have a location
or stock of goods that would create nexus, and because COMPANY does not regularly engage in
the other activities that would create nexus under Section 59-12-107(2)(a), the presence of
COMPANY’s R&D developer in Utah should not make COMPANY a seller “within the state”
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under that provision, and COMPANY should not have any obligation to collect/remit Utah sales
and use taxes under subsection (2)(a).
Moreover, COMPANY does not hold a substantial interest in, and is not in owned whole
or in substantial part by, a related seller as defined by Utah Code section 59-12-107(1)(b).
Accordingly, the presence of COMPANY’s R&D developer in Utah should not make
COMPANY a seller considered to be engaged in the business of selling tangible personal
property, a service, or a product transferred electronically for use in the state, for purposes of
Utah Code section 59-12-107(2)(b), and COMPANY should not have any obligation to
collect/remit Utah sales and use taxes under that section.
Utah Code § 59-12-103.1(1) also provides that a seller shall remit a tax to the
commission as provided in Section 59-12-107 if:
(a) the Supreme Court of the United States issues a decision authorizing a state to require
the following sellers to collect a sales or use tax: (i) a seller that does not meet one or
more of the criteria described in Subsection 59-12-107(2)(a); or (ii) a seller that is not a
seller required to pay or collect and remit sales and use taxes under Subsection 59-12-
107(2)(b); or
(b) Congress permits the state to require the following sellers to collect a sales or use tax:
(i) a seller that does not meet one or more of the criteria described in Subsection 59-12-
107(2)(a); or (ii) a seller that is not a seller required to pay or collect and remit sales and
use taxes under Subsection 59-12-107(2)(b).
That statute does not affect the application of Section 59-12-107 to the facts presented by
COMPANY, for the U.S. Supreme Court has neither ruled in a way that changes the
requirements of Section 59-12-107 nor held that the mere presence of a non-sales employee
within a state constitutes “substantial nexus” for purposes of the commerce clause of the United
States Constitution. See, e.g., Quill Corp. v. North Dakota, 504 U.S. 298 (1992). Moreover,
based on our informal conversations with State Tax Commission personnel, we understand that
the Commission’s position is that COMPANY’s non-sales activities within the state do not give
rise to a tax collection obligation.
Conclusion
For all the reasons discussed herein, COMPANY requests that the Commission provide a
legal ruling pursuant to Utah ADC R861-1A-34 to confirm (i) that the presence of COMPANY’s
R&D employee in Utah does not make COMPANY a seller “within the state” for purposes of
Utah Code section 59-12-107(2)(a) or a seller considered to be engaged in the business of selling
tangible personal property, a service, or a product transferred electronically for use in the state,
for purposes of Utah Code section 59-12-107(2)(b); and (ii) that COMPANY is not required to
collect sales or use tax on sales to Utah customers for any other reason. COMPANY would be
happy to provide additional facts at the Commission’s request. Please contact me with any
questions, concerns, or requests for clarification or elaboration on this request. Thank you.
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Sincerely,
/s/
NAME-1
RESPONSE LETTER
PRIVATE LETTER RULING 17-005
August 23, 2018
NAME-1
COMPANY-2
ADDRESS
CITY, STATE & ZIP CODE
EMAIL ADDRESS
Dear NAME-1:
This letter is in response to your request for a private letter ruling for COMPANY.
(“Company”).
The Company sells nutritional supplements and health foods online from the Company’s
website and through the Company’s catalogs to customers in ##### states. The Company is
incorporated and headquartered outside of Utah. The Company has one non-sales employee in
Utah, who telecommutes from her in-home office.
You have asked about whether the Company is a seller with a Utah sales tax collection
and remittance requirement under Utah Code § 59-12-107(2). This private letter ruling concludes
that the Company is a seller that is required to collect and remit sales taxes as required by
§ 59-12-107(2)(a). Additionally, under § 59-12-107(2)(e), the Company is required to pay Utah
use taxes on any storage, use, or consumption of tangible personal property or products
transferred electronically if that storage, use, or consumption occurs in Utah. Section III. of this
private letter ruling includes analyses for these conclusions.
I. Facts
As mentioned previously in this private letter ruling, the Company sells nutritional
supplements and health foods online from the Company’s website and through the Company’s
catalogs to customers in ##### states. The Company is incorporated and headquartered outside
of Utah.
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The facts did not explain how the Company sends its catalogs into Utah. This private
letter ruling assumes the Company delivers the catalogs directly to Utah customers through the
U.S. Mail or by common carrier.
You further stated in your request letter the following about the Company. The Company
“does not have any permanent or temporary locations . . . in Utah.” The Company “does not
engage in activities related to leasing and/or servicing of property located within [Utah].” The
Company “does not maintain a stock of goods in Utah.” The Company “does not have any
representatives, agents, salespersons, canvassers, independent contractors, or solicitors operating
in [Utah] for the purpose of selling, delivering, installing, assembling or taking orders for [the
Company].” The Company only regularly solicits orders in Utah through the Internet and
catalogs. The Company transports and delivers the products into Utah to the customers via
common carrier.
Additionally, you explained in your request letter that the Company “does not hold a
substantial ownership interest in, and is not owned in whole or in substantial part by, a related
seller.”
Furthermore, you explained in your request letter that the Company “has not collected
sales or use tax on its sales to Utah customers, and . . . has not held a Utah sales and use tax
permit.”
In your request letter, you also explained the following about the employee located in
Utah and about her in-home office:
In MONTH YEAR, [the Company] hired a research and development
employee who is a resident of Utah. This employee (whose title is “Director of
Innovation”) telecommutes from her in-home office in Utah. She does not solicit
sales or orders; she does not maintain a stock of [Company’s] goods; she does not
take customer orders or otherwise service customer accounts for [the Company];
and she does not engage in leasing or servicing property located in Utah on behalf
of [the Company]. Rather her work is directed towards the innovation and
improvement of health food and other nutritional products for the [C]ompany.
Her in-home office is not held out to the public as an office or other permanent or
temporary place of business for [the Company], and she does not advertise or
promote her home as a place of business for [the Company] (e.g., through a sign,
letterhead, or business card). In short, [the Company] does not have a Utah
location, stock or a sales representative within the state; however, [the Company]
seeks confirmation from the Commission in this request that the presence of its
R&D developer working in a non-sales role from her in-home office in Utah will
not trigger any sales or use tax collection obligations on sales to [the Company’s]
Utah customers.
Based on the facts presented, the Company’s Utah employee only seems to regularly work from
her in-home office and not from any other locations. Additionally, it is unclear what Company
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supplies, equipment, other personal property, or products transferred electronically the Utah
employee might use in the in-home office.
II. Applicable Law
Utah Code Annotated § 59-12-103(1) imposes tax on certain transactions, stating the
following in part:
A tax is imposed on the purchaser as provided in this part on the purchase price or
sales price for amounts paid or charged for the following transactions:
(a) retail sales of tangible personal property made within the state;
....
(l) amounts paid or charged for tangible personal property if within this state the
tangible personal property is:
(i) stored;
(ii) used; or
(iii) consumed; . . .
....
Utah Code Annotated § 59-12-102 provides definitions, as follows, in part:
(109) “Retail sale” or “sale at retail” means a sale, lease, or rental for a purpose
other than:
(a) resale;
(b) sublease; or
(c) subrent.
(110)(a) “Sale” means any transfer of title, exchange, or barter, conditional or
otherwise, in any manner, of tangible personal property or any other
taxable transaction under Subsection 59-12-103(1), for consideration.
....
(124) “Storage” means any keeping or retention of tangible personal property or
any other taxable transaction under Subsection 59-12-103(1), in this state for
any purpose except sale in the regular course of business.
(125)(a) Except as provided in Subsection (125)(d) or (e), “tangible personal
property” means personal property that:
(i) may be:
(A) seen;
(B) weighed;
(C) measured;
(D) felt; or
(E) touched; or
(ii) is in any manner perceptible to the senses.
....
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(136)(a) “Use” means the exercise of any right or power over tangible personal
property, a product transferred electronically, or a service under
Subsection 59-12-103(1), incident to the ownership or the leasing of that
tangible personal property, product transferred electronically, or service.
(b) “Use” does not include the sale, display, demonstration, or trial of
tangible personal property, a product transferred electronically, or a
service in the regular course of business and held for resale.
....
Utah Code Annotated § 59-12-211 provides the sourcing of certain transactions, stating
in part the following:1
(1) As used in this section:
(a) (i) “Receipt” and “receive” mean:
(A) taking possession of tangible personal property;
....
(ii) “Receipt” and “receive” do not include possession by a shipping
company on behalf of a purchaser.
....
(3) Subject to Subsection (10), and except as provided in Subsections (7), (8),
(9), (11), and (14), if tangible personal property . . . is not received by a
purchaser at a business location of a seller, the location of the transaction is
the location where the purchaser takes receipt of the tangible personal
property . . .
....
(14) This section does not apply to:
....
(b) a tax a person pays in accordance with Subsection 59-12-107(2)(e); . . .
....
1
Subsections (7), (8), (9), (10), (11), and (14) of § 59-12-211 are not directly at issue for this private letter
ruling. Subsections (10) and (7) explain how a location is determined using ZIP Codes. Subsection (8)
addresses how a location is determined when a transaction is made with a direct payment permit.
Subsection (9) applies to purchases of direct mail. Subsection (11) applies to florist delivery transactions.
Subsection (14)(a) explains that § 59-12-211 does not apply to retail sales or transfers of certain
telecommunications services, motor vehicles, aircraft, watercraft, modular homes, manufactured homes,
mobile homes, and rentals of tangible personal property. Subsection (14)(b) explains that § 59-12-211
does not apply to Utah use taxes a person pays. Subsection (14)(c) explains that § 59-12-211 does not
apply to certain retail sales of tangible personal property if the seller receives the order in Utah.
For more direction on the application of § 59-12-211 to particular situations, people may contact the
Taxpayer Services Division’s Technical Research Unit by phone at 801-297-7705, by email at
[email protected], or by mail at 210 N 1950 W, Salt Lake City, UT 84134.
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Thus, under § 59-12-211(3), sales of tangible personal property are sourced to the locations
where the purchasers receive the property when the purchasers do not receive the property at the
sellers’ locations.
Utah Code Annotated § 59-12-107 requires certain sellers to “pay or collect and remit”
Utah sales and use taxes, stating the following in part:
(1) As used in this section:
(a) “Ownership” means direct ownership or indirect ownership through a
parent, subsidiary, or affiliate.
(b) “Related seller” means a seller that:
(i) meets one or more of the criteria described in Subsection (2)(a)(i);
and
(ii) delivers tangible personal property, a service, or a product
transferred electronically that is sold:
(A) by a seller that does not meet one or more of the criteria
described in Subsection (2)(a)(i); and
(B) to a purchaser in the state.
(c) “Substantial ownership interest” means an ownership interest in a
business entity if that ownership interest is greater than the degree of
ownership of equity interest specified in 15 U.S.C. Sec. 78p, with respect
to a person other than a director or an officer.
(2) (a) Except as provided in Subsection (2)(e), Section 59-12-107.1, or Section
59-12-123, and subject to Subsection (2)(f), each seller shall pay or
collect and remit the sales and use taxes imposed by this chapter if
within this state the seller:
(i) has or utilizes:
(A) an office;
(B) a distribution house;
(C) a sales house;
(D) a warehouse;
(E) a service enterprise; or
(F) a place of business similar to Subsections (2)(a)(i)(A) through
(E);
(ii) maintains a stock of goods;
(iii) regularly solicits orders, regardless of whether or not the orders are
accepted in the state, unless the seller’s only activity in the state is:
(A) advertising; or
(B) solicitation by:
(I) direct mail;
(II) electronic mail;
(III) the Internet;
(IV) telecommunications service; or
(V) a means similar to Subsection (2)(a)(iii)(A) or (B);
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(iv) regularly engages in the delivery of property in the state other than
by:
(A) common carrier; or
(B) United States mail; or
(v) regularly engages in an activity directly related to the leasing or
servicing of property located within the state.
(b) A seller is considered to be engaged in the business of selling tangible
personal property, a service, or a product transferred electronically for
use in the state, and shall pay or collect and remit the sales and use taxes
imposed by this chapter if:
(i) the seller holds a substantial ownership interest in, or is owned in
whole or in substantial part by, a related seller; and
(ii) (A) the seller sells the same or a substantially similar line of
products as the related seller and does so under the same or a
substantially similar business name; or
(B) the place of business described in Subsection (2)(a)(i) of the
related seller or an in state employee of the related seller is used
to advertise, promote, or facilitate sales by the seller to a
purchaser.
(c) A seller that does not meet one or more of the criteria provided for in
Subsection (2)(a) or is not a seller required to pay or collect and remit
sales and use taxes under Subsection (2)(b):
....
(ii) . . . shall collect a tax on a transaction described in Subsection
59-12-103(1) if Section 59-12-103.1 requires the seller to collect the
tax.
....
Utah Code Annotated § 59-12-103.1(1) requires sellers to collect Utah sales and use taxes
in certain situations even if those sellers do not meet § 59-12-107(2)(a), with § 59-12-103.1(1)
stating the following in part:2
[A] seller shall remit a tax to the commission as provided in Section 59-12-107 if:
(a) the Supreme Court of the United States issues a decision authorizing a state
to require the following sellers to collect a sales or use tax:
2
As explained in this private letter ruling, the Company has nexus by meeting § 59-12-107(2)(a).
Because the Company meets § 59-12-107(2)(a), § 59-12-103.1 does not apply to the Company’s situation.
If the Company had not met § 59-12-107(2)(a), this private letter ruling would have analyzed the
U.S. Supreme Court’s decisions to apply § 59-12-103.1(1) to the Company’s situation. However, because
the Company meets § 59-12-107(2)(a), this private letter ruling does not analyze the U.S. Supreme
Court’s decisions. Thus, the recent U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., et al.,
585 U.S. ___ (2018), does not affect the conclusions of this private letter ruling.
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(i) a seller that does not meet one or more of the criteria described in
Subsection 59-12-107(2)(a); or
(ii) a seller that is not a seller required to pay or collect and remit sales and
use taxes under Subsection 59-12-107(2)(b); . . .
....
Utah Code Annotated § 59-12-107(2)(e) requires a person to pay Utah use taxes in
certain situations, stating the following:
A person shall pay a use tax imposed by this chapter on a transaction described in
Subsection 59-12-103(1) if:
(i) the seller did not collect a tax imposed by this chapter on the transaction; and
(ii) the person:
(A) stores the tangible personal property or product transferred electronically
in the state;
(B) uses the tangible personal property or product transferred electronically
in the state; or
(C) consumes the tangible personal property or product transferred
electronically in the state.
III. Analysis
Subsections III.A. through III.E. of this Analysis Section explains the Company’s Utah
sales tax collection and remittance requirement. Subsection III.F. explains the Company’s use
tax requirement. Subsection III.G. explains that prospective enforcement is appropriate for your
situation.
A. The Company’s retail sales of health products to purchasers located in Utah
are subject to Utah sales and use taxes.
Subsection 59-12-103(1)(a) imposes sales and use taxes on “retail sales of tangible
personal property made within the state.”3 The Company’s retail sales of health products to Utah
customers are “retail sales of tangible personal property.”
Section 59-12-211 is a sourcing statute; it addresses whether a transaction is “within the
state” for purposes of § 59-12-103(1)(a). Under § 59-12-211(3), generally “if tangible personal
property . . . is not received by a purchaser at a business location of a seller, the location of the
transaction is the location where the purchaser takes receipt of the tangible personal property.”
Section 59-12-211 includes exceptions that do not apply to the situation of this private letter
ruling. Under § 59-12-211(1)(a)(i), “receipt” includes “taking possession of tangible personal
property.” Thus, the Company’s retail sales of health products to Utah customers are sourced to
3
“Retail sale,” “sale,” and “tangible personal property” are defined in § 59-12-102(109), (110), and (125),
respectively.
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the Customer’s addresses; these are "the location[s] where the purchaser[s] take[] receipt of the
tangible personal property.”
Thus, the Company’s retail sales of health products to Utah customers are taxable under
§ 59-12-103(1)(a). The focus of this appeal, though, is not whether the retail sales of health
products to Utah customers are taxable, but instead, whether the Company has a Utah sales tax
collection and remittance requirement under § 59-12-107. As explained below, the Company
has that requirement.
B. The Company has a Utah sales tax collection and remittance requirement
under both § 59-12-107(2)(a)(i) and (iii).
The Company has a Utah sales tax collection and remittance requirement under
§ 59-12-107(2)(a)(i) and § 59-12-107(2)(a)(iii), as explained below in Subsections III.C. and
III.D. of this private letter ruling.
C. The Company has a Utah sales tax collection and remittance requirement
under § 59-12-107(2)(a)(i) because the Company utilizes an office or similar
place of business.
Subsection 59-12-107(2)(a)(i) requires the Company to “pay or collect and remit [Utah]
sales and use taxes . . . if within [Utah] [the Company] . . . utilizes . . . an office [or] a place of
business similar to [an office].” The Company “utilizes” in Utah “an office” or “a place of
business similar to [an office]” by utilizing the Utah employee’s in-home office when she
regularly telecommutes from this location. This conclusion does not change even if the
Company does not hold out the in-home office to the public as a place of business for the
Company.
D. The Company has a Utah sales tax collection and remittance requirement
under § 59-12-107(2)(a)(iii) because the Company’s Utah activities include
more than just certain advertising and solicitation through direct mail, the
Internet, etc.
Subsection 59-12-107(2)(a)(iii) requires the Company to “pay or collect and remit [Utah]
sales and use taxes . . . if within [Utah] [the Company] . . . regularly solicits orders . . . unless the
[Company’s] only activity in [Utah] is . . . advertising; or . . . solicitation by . . . direct mail[,] . . .
electronic mail[,] . . . the Internet[,] . . . telecommunications service[,] or . . . a [similar means].”
The Company regularly solicits orders in Utah. Thus, under § 59-12-107(2)(a)(iii), the
Company must collect and remit sales taxes “unless the [Company’s] only activity in [Utah] is
advertising . . . or solicitation by direct mail[,] . . . Internet[, etc.]” (emphasis added). The
Company’s only activity in Utah, though, is not limited to advertising or solicitation by direct
mail, Internet, etc. Instead, the Company’s activities in Utah also include having a Utah
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employee who regularly researches and develops products for the Company at her in-home
office located in Utah. Thus, the exception found within § 59-12-107(2)(a)(iii) is unmet, and the
Company must collect and remit Utah sales and use taxes under § 59-12-107(2)(a)(iii).
E. This private letter ruling does not reach the issue of whether the Company
also has a Utah sales tax collection and remittance requirement under
§ 59-12-107(2)(b).
Subsection 59-12-107(2)(b) requires the Company to “pay or collect and remit [Utah]
sales and use taxes” if a seller and a related seller have certain ownership relationships and
engage in certain activities. One of the requirements for § 59-12-107(2)(b) to apply is found in
§ 59-12-107(2)(b)(i), which states the following:
[T]he seller holds a substantial ownership interest in, or is owned in whole or in
substantial part by, a related seller . . .
Subsection 59-12-107(1) defines “ownership,” “related seller,” and “substantial ownership
interest.”
You explained in your request letter that the Company “does not hold a substantial
ownership interest in, and is not owned in whole or in substantial part by, a related seller.” Thus,
you have directly asserted that § 59-12-107(2)(b)(i), quoted above, is not met. You have not
provided more facts to apply § 59-12-107(2)(b) further.
While § 59-12-107(2)(b) does not seem to apply to the Company’s situation, this private
letter ruling does not reach a conclusion for § 59-12-107(2)(b) because a determination under
§ 59-12-107(2)(b) is unnecessary. The Company already has a Utah sales tax collection and
remittance requirement under § 59-12-107(2)(a).
F. The Company is subject to Utah use taxes on items it utilizes in Utah.
Under § 59-12-103(1)(l), Utah imposes use taxes as follows:4
A tax is imposed on the purchaser as provided in this part on the purchase price or
sales price for amounts paid or charged for the following transactions:
....
(l) amounts paid or charged for tangible personal property if within this state the
tangible personal property is:
(i) stored;
(ii) used; or
(iii) consumed; . . .
....
4
“Storage” and “use” are defined in § 59-12-102(124) and (136), respectively.
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For use taxes, the Company has a payment requirement under § 59-12-107(2)(e) as
follows:
[The Company] shall pay a use tax imposed by this chapter on a transaction
described in Subsection 59-12-103(1) if:
(i) [the Company’s vendor] did not collect a tax imposed by this chapter on the
transaction; and
(ii) [the Company]:
(A) stores the tangible personal property or product transferred electronically
in the state;
(B) uses the tangible personal property or product transferred electronically
in the state; or
(C) consumes the tangible personal property or product transferred
electronically in the state.
For this private letter ruling, the Company likely stores, uses, and/or consumes tangible
personal property or products transferred electronically at the in-home office located in Utah.
The tangible personal property the Company uses or consumes in Utah may also include catalogs
the Company mails or otherwise sends into Utah. Under § 59-12-107(2)(e), if the Company’s
vendor did not already collect Utah sales and use taxes on the Company’s purchases of the
tangible personal property or products transferred electronically that the Company stores, uses,
or consumes in Utah, the Company must pay Utah use taxes on the amounts the Company paid
for the tangible personal property or products transferred electronically.
G. Prospective enforcement is appropriate for your situation.
Based on the facts and circumstances of your unique situation, the Commission finds that
prospective enforcement of the Company’s Utah sales tax collection and remittance requirement
and the Company’s requirement to pay Utah use taxes is appropriate. Thus, as of thirty (30) days
from the date of this private letter ruling, the Company is obligated to collect Utah sales and use
taxes on the Company’s mail-order sales to Utah customers and to pay any Utah use taxes that
the Company incurs.
IV. Conclusions
In summary, the Company is a seller that is required to collect and remit Utah sales tax as
required by § 59-12-107(2)(a). Additionally, under § 59-12-107(2)(e), the Company is required
to pay Utah use taxes on any storage, use, or consumption of tangible personal property or
products transferred electronically if that storage, use, or consumption occurs in Utah.
The Tax Commission’s conclusions are based on the facts as you described them and the
Utah law currently in effect. Should the facts be different or if the law were to change, a
different conclusion may be warranted. If you feel we have misunderstood the facts as you have
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presented them, you have additional facts that may be relevant, or you have any other questions,
please feel free to contact the Commission.
Additionally, you may also appeal the private letter ruling in the following two ways.
First, you may file a petition for declaratory order, which would serve to challenge
the Commission's interpretation of statutory language or authority under a statute. This petition
must be in written form, and submitted within thirty (30) days after the date of this private letter
ruling. You may submit your petition by any of the means given below. Failure to submit
your petition within the 30-day time frame could forfeit your appeal rights and will be
deemed a failure to exhaust your administrative remedies. Declaratory orders are discussed
in Utah Administrative Code R861-1A-34 C.2., available online
at http://tax.utah.gov/commission/effective/r861-01a-034.pdf, and in Utah Administrative Code
R861-1A-31, available online at http://tax.utah.gov/commission/effective/r861-01a-031.pdf.
Second, you may file a petition for redetermination of agency action if your private letter
ruling leads to an audit assessment, a denial of a claim, or some other agency action at a division
level. This petition must be written and may use form TC-738, available online
at http://tax.utah.gov/forms/current/tc-738.pdf. Your petition must be submitted by any of the
means given below, within thirty (30) days, generally, of the date of the notice of agency action
that describes the agency action you are challenging.
You may access general information about Tax Commission Appeals online
at http://tax.utah.gov/commission-office/appeals. You may file an appeal through any of the
means provided below:
• Best way—by email: [email protected]
• By mail: Tax Appeals
USTC
210 North 1950 West
Salt Lake City, UT 84134
• By fax: 801-297-3919
For the Commission,
Rebecca L. Rockwell
Commissioner
RLR/aln
17-005
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