If a buyer at a Utah auction hires his own commonly-owned trucking company to haul the goods to another state, is the sale exempt from Utah sales tax — and does it matter that the buyer owns the carrier?
Plain-English summary
A Utah auctioneer sells equipment to buyers from many states. A Montana buyer claimed his purchase (an air compressor and two storage containers) was exempt because his own trucking company — a separately registered business he also owned — hauled the goods from the Utah auction site to Montana. The auctioneer was suspicious: if the buyer owns the carrier, didn't the buyer really take possession in Utah? The auctioneer asked the Commission (1) whether a buyer can hire his own commonly-owned common carrier and still avoid Utah tax, and (2) whether separate FEINs are enough proof.
The Commission concluded the sale is not subject to Utah sales tax — and that the common ownership does not change that. The logic is pure sourcing, not a traditional "exemption":
- Utah taxes "retail sales of tangible personal property made within the state" (§ 59-12-103(1)(a)). Whether a sale is "made within the state" is decided by the sourcing statute, § 59-12-211.
- Under § 59-12-211, a sale is sourced to where the purchaser takes receipt of the goods. And the statute says "receive" does not include possession by a shipping company on behalf of a purchaser (§ 59-12-211(1)(a)(ii)). So when a shipping company picks the goods up in Utah, that is not the buyer receiving them.
- Here the carrier was a genuine shipping company (a common carrier with a USDOT number, its own FEIN, its own signers, its own physical address). So the buyer didn't "receive" the goods in Utah — he received them when the carrier delivered them in Montana. The sale is sourced to Montana under § 59-12-211(3), so it was not made within Utah and isn't taxable.
- Common ownership is irrelevant. Nothing in the sourcing statute requires the shipping company to be an unrelated third party; it only has to be a separate legal entity. Separate FEINs help prove that. The Commission backed this up by pointing to Washington's nearly identical (Streamlined Sales Tax) sourcing rule, which expressly treats a wholly-owned affiliated carrier as a "shipping company."
Two important boundaries the Commission drew:
- This is sourcing, not the Commerce Clause. Utah's old interstate-commerce statutory exemption was repealed in the mid-1990s. Because the sale was already non-taxable for sourcing reasons, the Commission never reached the U.S. Commerce Clause or its interstate-commerce rule (R865-19S-44). Those only matter when a sale is sourced to Utah and you need a constitutional shield.
- Self-pickup is different. The Commission (echoing its Taxpayer Services Division) warned: if the buyer physically picks up the goods in Utah and then arranges to ship them out, Utah sales tax is due — because the buyer received them in Utah. The carrier must also be a separate entity, not just an in-house division or branch of the buyer.
(Note: § 59-12-211 does not govern vehicles, aircraft, watercraft, or modular/manufactured/mobile homes (§ 59-12-211(14)); those have their own sourcing rules — see PLR 18-004 and 21-001.)
What this means for you
Sellers, auctioneers, and anyone shipping to out-of-state buyers
Whether you charge Utah sales tax on a sale to an out-of-state buyer turns on who takes possession in Utah. If a shipping company / common carrier picks the goods up and delivers them to the buyer in another state, the sale is generally sourced to that other state and no Utah tax is due — even if the carrier is owned by, or affiliated with, the buyer. What flips it to taxable is the buyer (or the buyer's own employee/in-house division) taking the goods in Utah, regardless of where they end up.
Documentation to keep
This ruling is a useful checklist of what persuaded the Commission that the carrier was a real separate shipping company: a bill of lading showing pickup at the seller's site and delivery to the out-of-state address, a separate FEIN, a USDOT number, and signers/contacts different from the buyer. A shared mailing address didn't sink it, because the physical address and other indicia differed. Keep the bill of lading and the carrier's registration details in your exemption file.
The "related carrier" trap — and why it wasn't a trap here
Buyers sometimes use their own logistics company. That's fine for Utah sourcing as long as the carrier is a distinct legal entity (separate FEIN, not a mere branch). It is not fine if "the carrier" is really the buyer's own truck and driver picking up in Utah — that's the buyer receiving the goods in-state, and tax applies.
Accountants and tax professionals
The key doctrinal move is that Utah resolved this as a sourcing question under the Streamlined-Sales-Tax-based § 59-12-211, expressly declining to reach the dormant Commerce Clause or R865-19S-44 (footnotes 1–2). The "receive ≠ possession by a shipping company" rule (§ 59-12-211(1)(a)(ii)) does the work, and the Commission read "shipping company" by ordinary dictionary meaning plus Washington's parallel rule to include affiliated carriers. Watch the § 59-12-211(14) carve-outs (vehicles, homes) and the self-pickup boundary.
Common questions
Q: A buyer from another state bought from us in Utah and shipped it home. Do we charge Utah sales tax?
A: If a shipping company or common carrier took possession of the goods in Utah and delivered them to the buyer out of state, the sale is generally sourced to the out-of-state delivery point and Utah tax doesn't apply. If the buyer personally picked the goods up in Utah, Utah tax is due even if the buyer later ships them elsewhere.
Q: The buyer's trucking company is owned by the same person who bought the goods. Does that ruin the exemption?
A: No. Utah's sourcing statute only requires the carrier to be a separate legal entity, not an unrelated third party. Common ownership is fine. Separate FEINs are good evidence of separate entities.
Q: What documents prove the goods left Utah by carrier?
A: A bill of lading showing pickup at the seller's location and delivery to the buyer's out-of-state address, plus the carrier's separate FEIN and (for trucking) USDOT registration. The Commission relied on exactly those here.
Q: Is this an "interstate commerce exemption"?
A: Not technically. Utah repealed its statutory interstate-commerce exemption in the 1990s. This sale escapes tax because it is sourced outside Utah, so the Commerce Clause and R865-19S-44 never come into play. Those constitutional arguments only matter when a sale is sourced to Utah.
Q: Can my business rely on this ruling?
A: No. A Utah private letter ruling binds the Commission only for the taxpayer and facts it was issued to. The reasoning is instructive, but your documentation and facts must support an out-of-state delivery by a separate shipping company.
Citations and references
Statutes, rule, and constitutional provision:
- Utah Code § 59-12-103(1)(a) — tax on retail sales of tangible personal property made within the state
- Utah Code § 59-12-211 — sourcing statute (when a sale is "made within the state")
- Utah Code § 59-12-211(1)(a) — "receipt"/"receive" defined; excludes possession by a shipping company on behalf of a purchaser
- Utah Code § 59-12-211(2), (3) — sourced to seller's business location if received there; otherwise to where the purchaser takes receipt
- Utah Code § 59-12-211(14) — sourcing statute does not apply to vehicles, aircraft, watercraft, or modular/manufactured/mobile homes
- Utah Code § 59-12-102(24) — "common carrier"
- Utah Admin. Code R865-19S-44 — interstate-commerce / Commerce Clause treatment (not applied; sale already non-taxable for sourcing reasons)
- U.S. Const. art. I, § 8, cl. 3 — the Commerce Clause (not reached)
Persuasive authority cited: Washington's parallel Streamlined-Sales-Tax sourcing rules (RCW 82.32.730; WAC 458-20-193), which treat a wholly-owned affiliated carrier as a "shipping company."
Source
- Landing page: https://tax.utah.gov/commission/rulings/
- Original PDF: https://files.tax.utah.gov/tax/commission/ruling/18-003.pdf
Original ruling text
FINAL PRIVATE LETTER RULING
REQUEST LETTER
18-003
June 4, 2018
Office of the Commission
Utah State Tax Commission
210 N 1950 W
Salt Lake City UT 84134
[email protected]
Dear Commissioners,
We are seeking a private letter ruling to confirm if an out of state buyer with multiple companies
may hire his common carrier business to ship his purchase out of state in order to claim interstate
commerce tax exemption.
Background:
Auctioneer is in the business of selling new and used tangible personal property through
unreserved public auctions. Auctioneer regularly sells [WORDS REMOVED] tangible personal
property. The auctions take place throughout the year at a location within the state. The owner
of the tangible personal property (hereinafter “the Consignor”) consigns the tangible personal
property to Auctioneer for the auction process while retaining the title to the tangible personal
property. Auctioneer acts as a selling agent for the Consignor and acquires a power of attorney
for the limited purpose of executing all documents required for a title transfer and registration,
without any further action of the Consignor. In addition to selling property that is owned by a
Consignor, Auctioneer also purchases tangible personal property in its own name to auction.
Auctioneer charges all buyers sales tax on the selling price of the auctioned tangible personal
property and remits the sales tax to the State unless the buyer produces the applicable resale
certificate, exemption certificate, or other acceptable documentation.
Potential buyers may bid on items at the auction in person, bid by submitting a proxy, or bid for
the items over the internet through the Auctioneer’s website. Buyers could be resident of the
state of the auction, resident of a different state, or resident of a different country.
Issue:
Auctioneer regularly sells new and used non-titled items to non-resident buyers. Recently one
buyer, PURCHASER, provided a Bill of Lading from his common carrier business,
TRANSPORTER, as evidence of third party transport to Montana in order to claim the interstate
commerce sales tax exemption. When auctioneer questioned the legitimacy of third party status
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of transporter, buyer provided individual Federal Employment Identification Numbers (FEINs)
for each company as proof of separate legal status.
We are requesting clarification on the following:
-
Can buyers who own multiple companies, including a common carrier, “hire” their
common carrier business to transport purchases for one of their other businesses out of
state and claim interstate commerce exemption or is the fact that both companies have the
same owner qualify as the buyer taking possession in state? -
If buyers can hire their common carrier business for exemption, is evidence of separate
FEINs enough proof to confirm third party status or is there other proof that needs to be
provided by the buyer?
These questions were initially addressed to the General Tax Questions section, however their
replies lacked a definitive answer the above questions. For your reference, I have included the
email history of these exchanges.
Thank you for your assistance. If there are any questions, please contact me at PHONE
NUMBER.
Best regards,
SELLER
NAME-1
TITLE-1
SELLER
ADDRESS-1
CITY-1, STATE-1, and ZIP CODE-1
PHONE NUMBER-1
EMAIL ADDRESS-1
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RESPONSE LETTER
May 8, 2019
NAME-1
TITLE-1
SELLER
ADDRESS-1
CITY-1, STATE-1, and ZIP CODE-1
EMAIL ADDRESS-1
Dear NAME-1:
This letter is in response to your request for a private letter ruling for SELLER (“Seller”),
which “regularly sells new and used non-titled items to non-resident buyers.” You have asked
the following question:
[May] an out-of-state buyer with multiple companies . . . hire his common carrier
business to ship his purchase out of state in order to claim [the] interstate
commerce tax exemption.
You also asked the following enumerated questions:
1. Can buyers who own multiple companies, including a common carrier, “hire”
their common carrier business to transport purchases for one of their other
businesses out of state and claim interstate commerce exemption or is the fact
that both companies have the same owner qualify as the buyer taking
possession in state?
2. If buyers . . . hire their common carrier business for exemption, is evidence of
separate FEINs enough proof to confirm third party status or is there other
proof that needs to be provided by the buyer?
This private letter ruling concludes the following. Under the Utah Code, the sale of
tangible personal property can be sourced to a location outside of Utah, and thus not be subject to
Utah sales and use taxes. The transaction you presented is sourced to a location outside of Utah,
in accordance with Utah Code Ann. § 59-12-211(3). The transaction is not taxable under Utah
Code Ann. § 59-12-103(1) because it is sourced to a location outside of Utah. Furthermore,
since the transaction is not taxable under § 59-12-103(1), this private letter ruling does not apply
the Commerce Clause found in the U.S. Constitution, art. I, § 8, cl. 3 to that transaction.
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Moreover, since this private letter ruling does not apply the Commerce Clause, it likewise does
not apply Utah Administrative Code R865-19S-44 to the transaction.1,2
When § 59-12-211(3) applies, as it does for the transaction you presented, an out-of-state
buyer can hire his common carrier business to ship his purchase out of state and have the
transaction sourced to that out of state location. When § 59-12-211(3) applies, the common
carrier, or “shipping company” as used in § 59-12-211(1)(a)(ii), must be a separate entity from
the purchaser, but the common carrier or shipping company is not required to have a different
owner than the purchaser. Separate Federal Employer Identification Numbers (“FEIN(s)”) can
show that the purchaser and the common carrier or shipping company are separate entities. This
private letter ruling further explains these conclusions in Section III. below.
I. Facts
You explained the following, in part, about the Seller and the sales transaction at issue.
[Seller] regularly sells [WORDS REMOVED] tangible personal property. . . .
....
[Seller] regularly sells new and used non-titled items to non-resident buyers.
Recently one buyer, PURCHASER, provided a Bill of Lading from his common
carrier business, TRANSPORTER, as evidence of third party transportation to
Montana in order to claim the interstate commerce sales tax exemption. When
[the Seller] questioned the legitimacy of third party status of transporter, buyer
provided individual Federal Employment Identification Numbers (FEINs) for
each company as proof of separate legal status.
This private letter ruling will refer to the items sold as “Property”; will refer to PURCHASER as
“Purchaser”; will refer to the bill of lading from TRANSPORTER as “Bill of Lading”; and will
refer to TRANSPORTER as “Transporter.”
In response to follow-up questions, you provided an invoice showing the Seller sold the
Property to the Purchaser on March 26, 2018, for $$$$$ plus sales taxes. The Property on the
1
R865-19S-44 covers “[s]ales made in interstate commerce.” The Utah Code contains no exemption in
§ 59-12-104 that specifically covers sales made in interstate commerce. R865-19S-44 does not provide an
interpretation of specific language found in § 59-12-104. Instead, R865-19S-44 provides direction on the
application of the U.S. Constitution’s Commerce Clause to Utah’s sales and use taxes.
For background, a prior version of § 59-12-104 contained an exemption that addressed sales made in interstate
commerce. Subsection 59-12-104(12) (1987) exempted “sales or use of property which the state is prohibited from
taxing under the Constitution or laws of the United States or under the laws of this state.” However, this provision
was removed in the mid-1990’s. See page 10 of “Findings of Fact, Conclusions of Law, and Final Decision” for
Appeal No. 05-0317, signed 01/11/2007, available online through the search field on the tax.utah.gov website.
2
If a transaction is located in Utah in accordance with the sourcing statutes found in Utah Code Ann.
§ 59-12-211 through § 59-12-215 and the transaction is described in § 59-12-103(1) as being subject to Utah sales
and use tax, that transaction can still be excluded from taxation based on the Commerce Clause of the U.S.
Constitution and on R865-19S-44.
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invoice includes a portable air compressor and two 20-ft. storage containers. The invoice lists
the auction location as UTAH CITY and the Purchaser’s contact name as NAME-2. The invoice
calculates sales tax. The invoice also shows a wire transfer payment on March 30, 2018, of
$$$$$, which is the sales price, without sales tax. The invoice includes a note stating, “Bill of
Lading Required.” You explained that the purpose of “Bill of Lading Required” is to
communicate between the Seller’s auction site and Seller’s office location that a purchaser is
claiming an exemption. You explained that sales tax is calculated on all sales and is not removed
until a purchaser provides sufficient paperwork showing that the purchaser qualifies for an
exemption.
Along with the invoice, you also provided a copy of the Bill of Lading. The Bill of
Lading shows the “from” location to be the Transporter’s name. You explained that this is an
error by the Transporter who prepared the Bill of Lading. The “from” location should be the
auction site. You explained that you could probably get a corrected bill of lading showing the
correct “from” location. The Bill of Lading shows the “to” location to be a Montana address for
the Purchaser. The Bill of Lading lists the Property sold as one “sullair compressor” and two
“20’ storage containers,” which information is consistent with the description of the Property on
the invoice. The Bill of Lading includes a signature for an individual with the first name
NAME-3 and a last name which is difficult to read. NAME-3 signed on behalf of the
Transporter. The Bill of Lading does not have the date and time of pickup, the date and time of
delivery, or a point of delivery acceptance signature. You explained that the pickup date and
time can generally be found on the release ticket. You explained that the delivery acceptance
signature and the date and time of delivery are generally not included on the copies of the bills of
lading the Seller receives from its purchasers. You explained that the Seller generally receives
bills of lading when the transporters pick up the property from the Seller for the purchasers,
which is before the transporters’ deliveries are completed. You explained that your primary
concern with the Bill of Lading is that the Transporter does not appear to be an unrelated third
party to the Purchaser.
In addition to the Bill of Lading, you provided a copy of the release ticket. The release
ticket shows the Property sold and states, “Bill of Lading Required.” The release ticket also
shows the “Transportation” name as “[NAME REMOVED],” the driver’s first name as
NAME-4, the driver’s license plate as being from Montana, and the pickup date as March 30,
2018. The driver’s last name is difficult to read.
The driver’s name for the release ticket, which is NAME-4, does not match the signer of
the Bill of Lading, who was NAME-3. You explained that you think the Seller received the Bill
of Lading after the Property was picked up.
In your request letter for this private letter ruling, you explained that you sought guidance
from the Tax Commission but did not get definitive answers to your questions. You attached a
copy of an email chain between you and the Taxpayer Services Division of the Tax Commission.
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In the email chain, you explained the following:
Upon investigation [the Seller] discovered both companies[,] [Purchaser and
Transporter,] are owned by the same person . . .
At a glance, it seems the only real difference between these companies is cosmetic
and mostly applicable to IRS filing status, not necessarily as wholly separate
businesses. So my concern is can [the Seller] accept this Bill of Lading as proof
of interstate commerce exemption or since both companies are owned by the same
person, does this equate into the buyer (or his agent) taking possession in state?
Also in the email chain, the Taxpayer Services Division provided, in part, the following
guidance:
Administrative Rule R865-19S-44 outlines the exemption for interstate [c]ommerce . . .
And
If a purchaser physically picks up the product in [Utah] and arranges for the
product to be shipped from [Utah] to another state, sales tax would be due.
In response to follow up questions, you sent a copy of a “Company Snapshot” document
for the Transporter. Based on that document, the Transporter has a USDOT number. The
Company Snapshot lists a physical address and a mailing address for the Transporter. The
Transporter’s mailing address is the same as the Purchaser’s address on the invoice and as the
Purchaser’s delivery address on the Bill of Lading. The Transporter’s physical address on the
Company Snapshot differs from the Purchaser’s address on the invoice and Bill of Lading.
II. Applicable Law
Utah Code Ann. § 59-12-103(1) imposes tax on certain transactions, stating the following
in part:
A tax is imposed on the purchaser . . . 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;
....
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Utah Code Ann. § 59-12-211 is a sourcing statute. It addresses when a sale is “made
within the state” for purposes of § 59-12-103(1). It states the following, in part:3
(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.
....
(2) Except as provided in Subsections (8) and (14), if tangible personal
property[] . . . that is subject to taxation under this chapter is received by a
purchaser at a business location of a seller, the location of the transaction is
the business location of the seller.
(3) Subject to Subsection (10), and except as provided in Subsections (7), (8),
(9), (11), and (14), if tangible personal property[] . . . that is subject to
taxation under this chapter 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:
(a) amounts charged by a seller for:
....
(ii) the retail sale or transfer of:
(A) a motor vehicle other than a motor vehicle that is transportation
equipment;
(B) an aircraft other than an aircraft that is transportation equipment;
(C) a watercraft;
(D) a modular home;
(E) a manufactured home; or
(F) a mobile home; . . ..
....
The term “shipping company” is used in § 59-12-211(1)(a)(ii) to define “receipt” and
“receive.” Utah Code Ann. § 59-12-102 and other areas of the Utah Code do not define
“shipping company.”
3
Subsections (7)-(11) do not apply to the situation presented in this private letter ruling. The subjects of
Subsections (7)-(11) are described in the sentences that follow. Subsection (7) concerns a shared ZIP Code, local
taxing jurisdictions, and lowest agreement combined tax rate. Subsection (8) concerns a direct payment permit.
Subsection (9) concerns direct mail. Subsection (10) concerns determining the local taxing jurisdiction based on ZIP
Codes. Subsection (11) concerns a florist delivery transaction.
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III. Analysis
As explained previously in this private letter ruling, you have asked about whether Utah
sales and use taxes apply to a particular sale of Property by the Seller to the Purchaser when, in
conjunction with that sale, the Purchaser hires a related Transporter to ship the Property from the
Seller’s location to the Purchaser’s out of state location.
This private letter ruling concludes that the sale presented is not subject to Utah sales and
use taxes because it is sourced to a location outside of Utah, in accordance with § 59-12-211(3).
The Transporter and Purchaser are separate companies. The Transporter is a shipping company.
The fact that the Transporter and Purchaser are related does not change these conclusions. The
analysis supporting these conclusions is below.
This Analysis Section includes the following subsections:
● The sales transaction you presented is not subject to Utah sales and use taxes because
the transaction is located outside of Utah, in accordance with § 59-12-211(3).
● The related party status of the Transporter does not change the conclusion that the
transaction is sourced out of the state, in accordance with § 59-12-211(3).
A. The sales transaction you presented is not subject to Utah sales and use taxes
because the transaction is located outside of Utah, in accordance with
§ 59-12-211(3).
Subsection 59-12-103(1)(a) imposes Utah sales and use taxes on “retail sales of tangible
personal property made within the state.” For the transaction at issue, the Property the Seller
sold to the Purchaser was tangible personal property. Thus, that transaction would be subject to
Utah sales and use taxes if that sale were “made within the state”
Section 59-12-211 is a sourcing statute that addresses when a sale is made within the
state. According to § 59-12-211(14), § 59-12-211 does not apply to the retail sales of the
following:
(A) a motor vehicle other than a motor vehicle that is transportation equipment;
(B) an aircraft other than an aircraft that is transportation equipment;
(C) a watercraft;
(D) a modular home;
(E) a manufactured home; or
(F) a mobile home; . . .
§ 59-12-211(14)(a)(ii).
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The Property sold includes an air compressor and two storage containers. Thus, the Property is
not among the items listed in § 59-12-211(14)(a)(ii). Therefore, the transaction is sourced under
§ 59-12-211.
Section 59-12-211 sources a transaction based on where a purchaser takes receipt of the
tangible personal property. Under § 59-12-211(2), if a purchaser receives tangible personal
property “at a business location of a seller, the location of the transaction is the business location
of the seller.” Thus, if the Purchaser had received the Property at the Seller’s location, the sale
would have been “made within the state” for purposes of § 59-12-103(1)(a) and would be subject
to Utah sales and use taxes under § 59-12-103(1)(a).
Under § 59-12-211(3), if a purchaser does not receive the tangible personal property “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 . . .” Thus, if the Purchaser did not receive the
Property at the Seller’s location, then the sale was made where the Purchaser took receipt of the
Property. If the place where the Purchaser took receipt was outside of Utah, the sale would not
be subject to Utah sales and use taxes.
Subsection 59-12-211(1)(a) defines “receipt” and “receive” as including “taking
possession of tangible personal property” and “not includ[ing] possession by a shipping company
on behalf of a purchaser.” The Utah Code does not define “shipping company.” Thus, whether
the Purchaser took receipt of the Property at the Seller’s location depends on whether the
Transporter was a “shipping company.”
Dictionaries provide ordinary, usual, and accepted meanings of words. Webster’s New
Universal Unabridged Dictionary (1st ed. 2003), does not include a definition for “shipping
company.” However, Webster’s New Universal Unabridged Dictionary includes definitions for
“ship” (verb), “shipment,” “shipper,” and “shipping.” Id. at 1766. Definition 8 of “ship” means
“to send or transport by ship, rail, truck, plane, etc.” Definition 1 of “shipment” means “an act or
instance of shipping freight or cargo.” “Shipper” means “a person who ships goods or makes
shipments,” Definition 1 of “shipping” means “the act or business of a person or thing that
ships.” Based on the above definitions, an ordinary meaning of “shipping company” would
include a company whose primary business is shipping freight or cargo for customers.
Online dictionaries include definitions for “shipping company.” The Collins English
Dictionary defines “shipping company in British” as “a company that transports of [sic]
shipments of goods (by ship or other means of transport).”
See https://www.collinsdictionary.com/us/dictionary/english/shipping-company. The Cambridge
English Dictionary includes the following definition for “shipping” when used in the context of
“commerce” and “transport”: “the process or business of sending or transporting goods: . . . He
runs a big shipping company. . . .”
See https://dictionary.cambridge.org/dictionary/english/shipping. The Free Dictionary defines
“shipping company” as “a company that provides shipping services.”
See https://www.thefreedictionary.com/shipping+company. Similar to the definitions of
Webster’s New Universal Unabridged Dictionary, the online definitions discussed above also
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show “shipping company” would include a company whose primary business is shipping goods
for customers.
Based on the facts provided, the Transporter appears to be a shipping company. You
have described the Transporter as being a “common carrier business.” 4 The Transporter has a
USDOT Number. The Transporter issued the Bill of Lading. The Transporter has a different
FEIN than the Purchaser. The individuals signing on behalf of the Transporter differ from the
contact name for the Purchaser on the invoice. While the mailing address of the Transporter and
the Purchaser are the same, the physical address of the Transporter is different. You have not
presented facts showing the Transporter is not a shipping company. This private letter ruling
concludes the Transporter is a shipping company.5
As stated previously in this private letter ruling, under § 59-12-211(2) if a purchaser
receives the tangible personal property “at a business location of a seller, the location of the
transaction is the business location of the seller.” Under § 59-12-211(1)(a), “receive” does “not
include possession by a shipping company on behalf of a purchaser.” For your transaction, the
4
“Common carrier” is defined in Utah Code Ann. § 59-12-102(24) as follows:
(a) "Common carrier" means a person engaged in or transacting the business of transporting
passengers, freight, merchandise, or other property for hire within this state.
(b) (i) "Common carrier" does not include a person who, at the time the person is traveling to
or from that person's place of employment, transports a passenger to or from the
passenger's place of employment.
(ii) For purposes of Subsection (24)(b)(i), in accordance with Title 63G, Chapter 3, Utah
Administrative Rulemaking Act, the commission may make rules defining what
constitutes a person's place of employment.
(c) "Common carrier" does not include a person that provides transportation network services, as
defined in Section 13-51-102.
The definition of common carrier is consistent with, but not necessarily identical to, the dictionary definitions
discussed for “shipping company.”
The Transporter appears to be a “common carrier” because the Transporter seems to be “a person engaged
in or transacting the business of transporting . . . freight, merchandise, or other property for hire within this state.”
See § 59-12-102(24)(a).
Utah Administrative Code R865-19S-44 C. uses the term “common carrier” as follows:
Where delivery is made by the seller to a common carrier for transportation to the buyer outside
the state of Utah, the common carrier is deemed to be the agent of the vendor for the purposes of
this section regardless of who is responsible for the payment of the freight charges.
This private letter ruling does not definitively determine whether Transporter meets the definition
of “common carrier” because R865-19S-44 C. does not apply to the transaction. As explained
previously in this private letter ruling, R865-19S-44 C. does not apply because the transaction is
not taxable under § 59 12-103(1), so this private letter ruling does not analyze either the U.S.
Commerce Clause or R865-19S-44 C. to determine whether the transaction must be excluded from
taxation based on federal law.
5
As explained in Section IV. Conclusion, should the facts be different, a different conclusion may be warranted.
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Purchaser did not receive the Property at the Seller’s Utah location because the Transporter, a
shipping company, took possession of the Property at that location on behalf of the Purchaser.
As stated previously in this private letter ruling, under § 59-12-211(3) if a purchaser does
not receive the tangible personal property “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
. . .” For your transaction, the Purchaser took receipt of the Property at the location the
Purchaser received the Property from the Transporter. Based on the Bill of Lading, this location
was in Montana. This private letter ruling concludes that the location of the transaction was in
Montana, based on the facts presented.
As stated previously in this private letter ruling, § 59-12-103(1)(a) imposes Utah sales
and use taxes on “retail sales of tangible personal property made within the state” (emphasis
added). Because the location of the transaction is in Montana, the transaction does not meet
§ 59-12-103(1)(a). Thus, the transaction is not subject to Utah sales and use taxes.
B. The related party status of the Transporter does not change the conclusion that
the transaction is sourced out of the state, in accordance with § 59-12-211(3).
You explained that you primarily question the legitimacy of the third party status of the
Transporter. However, no language in § 59-12-211(1)(a), which defines “receipt,” requires the
shipping company to be an unrelated third party. Furthermore, as explained previously in this
private letter ruling, interpreting “shipping company” to include related third parties is consistent
with the ordinary, usual, and accepted meaning of “shipping company.” The ordinary meaning
of “shipping company” does not preclude that entity from being related to a purchasing entity.
Moreover, as explained below, § 59-12-211(1)(a) can be reasonably applied without requiring
the “shipping company” to be an unrelated third party.
The fact that § 59-12-211(1)(a) can be reasonably applied without requiring the
“shipping company” to be an unrelated third party is shown by analyzing Washington’s sourcing
statutes and rules. The State of Washington has sourcing statutes similar to Utah’s.6
6
The following paragraphs explain how Washington’s sourcing statutes are similar to Utah’s sourcing statutes.
Both Utah’s and Washington’s statutes follow the Streamlined Sales and Use Tax Agreement (“SSUTA”) of the
Streamlined Sales Tax Governing Board, Inc. A copy of the SSUTA is available through the “Library” section of
the website of the Streamlined Sales Tax Governing Board, Inc., located at https://www.streamlinedsalestax.org.
Furthermore, both Utah and Washington are Full Member States for purposes of the SSUTA. See the “State
Information” under the “About Us” tab of the website of the Streamlined Sales Tax Governing Board, Inc., located
at https://www.streamlinedsalestax.org (explaining the meaning of “a Streamlined Full Member State”).
Washington’s code has language similar to the Utah Code for the sourcing of transactions. Revised Code of
Washington § 82.32.730(1)(a) states the following in part:
When tangible personal property . . . defined as a retail sale under RCW 82.04.050 is received by
the purchaser at a business location of the seller, the sale is sourced to that business location.
Revised Code of Washington § 82.32.730(1)(b) states the following in part:
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Washington has interpreted “shipping company” to include a company affiliated with a
purchaser.7 Thus, a souring statute very similar to Utah Code Ann. § 59-12-211 has been
reasonably applied without requiring the “shipping company” to be an unrelated third party. No
facts suggest Utah’s sourcing statute cannot be reasonably applied in a similar way.
When the tangible personal property . . . defined as a retail sale under RCW 82.04.050 is not
received by the purchaser at a business location of the seller, the sale is sourced to the location
where receipt by the purchaser or the purchaser's donee, designated as such by the purchaser,
occurs, including the location indicated by instructions for delivery to the purchaser or donee,
known to the seller.
Revised Code of Washington § 82.32.730(9)(f) defines “receive” and “receipt” as follows, in part:
"Receive" and "receipt" mean taking possession of tangible personal property . . . "Receive" and
"receipt" do not include possession by a shipping company on behalf of the purchaser.
7
The following paragraphs explain how Washington has interpreted “shipping company” to include a company
affiliated with a purchaser.
Unlike Utah, Washington has enacted a definition of “shipping company.” This definition is found in
Washington Administrative Code (“WAC”) § 458-20-193(202)(b)(ii), which states the following:
A "shipping company" for purposes of this rule means a separate legal entity that ships, transports,
or delivers tangible personal property on behalf of another, such as a common carrier, contract
carrier, or private carrier either affiliated (e.g., an entity wholly owned by the seller or purchaser)
or unaffiliated (e.g., third-party carrier) with the seller or purchaser. A shipping company is not a
division or branch of a seller or purchaser that carries out shipping duties for the seller or
purchaser, respectively. Whether an entity is a "shipping company" for purposes of this rule
applies only to sourcing sales of tangible personal property and does not apply to whether a
"shipping company" can create nexus for a seller.
Washington has provided the following examples in WAC § 458-20-193(203)(a):
Example 3. An out-of-state purchaser sends its own trucks to Washington to receive goods at a
Washington-based seller and to immediately transport the goods to the purchaser's out-of-state
location. The sale occurs in Washington because the purchaser receives the goods in Washington.
The sale is subject to B&O and retail sales tax.
Example 4. The same purchaser in Example 3 uses a wholly owned affiliated shipping
company (a legal entity separate from the purchaser) to pick up the goods in Washington and
deliver them to the purchaser's out-of-state location. Because "receive" and "receipt" do not
include possession by the shipping company, the purchaser receives the goods when the goods
arrive at the purchaser's out-of-state location and not when the shipping company takes
possession of the goods in Washington. The sale is not subject to B&O tax or retail sales tax.
(Emphasis added.)
In Example 4 quoted above, Washington interprets “shipping company” to include “a wholly owned affiliated
shipping company (a legal entity separate from the purchaser).” In Example 4, although the shipping company is
related to the purchaser, the transaction is still sourced to the out of state location where the purchaser receives the
goods from the shipping company. The transaction is not sourced to the location the shipping company picks up the
goods.
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IV. Conclusion
This private letter ruling concludes that the sale presented is not subject to Utah sales and
use taxes because it is sourced to a location outside of Utah, in accordance with § 59-12-211(3).
Transporter and Purchaser are separate entities. The fact that they are related does not change
this private letter ruling’s conclusion about the taxability of that transaction.
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
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.
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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,
Lawrence C. Walters
Commissioner
LCW/aln
18-003
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