Could a Utah customer refuse to pay use tax to a licensed out-of-state seller and instead self-accrue and remit the tax directly to Utah?

Plain-English summary

Utah Private Letter Ruling 96-084 said a taxable Utah customer could not simply refuse to pay use tax to a licensed seller and promise to remit it directly.

Utah had no direct-pay option under the rule described in the response.

Because the seller held a Utah sales-tax license, the customer had to pay the tax to the seller, and the seller had to collect, report, and remit it.

The Commission granted a narrow transaction-specific exception because its staff had previously given the parties confusing and inconsistent advice.

Transaction

An out-of-state vendor registered in Utah sold scaffolding and other tangible personal property for delivery to a customer's Utah job site.

The customer did not claim that the purchase was exempt or for resale.

Instead, the customer refused to pay use tax to the vendor and said it would accrue and remit the tax directly to Utah.

The vendor asked what documentation, if any, would protect it from liability if the customer failed to remit.

No general direct-pay option

The Commission said Utah did not have a direct-pay option allowing this customer to self-accrue and remit the use tax directly.

A customer's Utah sales/use-tax registration certificate was not, by itself, a general basis for treating the taxable sale as exempt.

Because the seller had a Utah sales-tax license:

• The customer had to pay the use tax to the seller.
• The seller was responsible for collecting the tax.
• The seller had to report and remit it to Utah.

Narrow exception for this transaction

The Commission recognized that the seller had made several calls and received confusing advice from Commission staff.

Because this particular transaction had received that attention, the Commission allowed an exception if the customer continued refusing to pay the seller.

The seller could keep a signed customer letter in its tax records as evidence that:

• The customer had a Utah sales-tax license.
• The customer certified it would remit the use tax directly.
• The document included the customer's tax-license number.
• The document included the invoice number or another way to connect it to the sale.

If the seller accepted the letter in good faith and kept it in its records, the Commission said it would not hold the seller responsible for use tax due on this transaction.

Holding

Under the ruling:

• Utah had no general direct-pay option for the customer.
• The licensed seller ordinarily had to collect, report, and remit the tax.
• A customer registration certificate did not generally eliminate that duty.
• The Commission created a one-transaction exception because of its own conflicting advice.
• The exception required a signed, detailed, transaction-linked customer letter kept in the seller's records and accepted in good faith.

What this means for you

Out-of-state vendors and equipment sellers

Do not accept a customer's promise to self-remit as an exemption unless current Utah law and documentation expressly allow it.

Contractors and purchasers

A sales/use-tax registration number is not the same as a direct-pay permit or exemption certificate.

Accounts-receivable teams and accountants

Keep transaction-specific documentation tied to invoices, but do not treat this historical discretionary exception as a reusable compliance method.

Common questions

Q: Could the buyer self-accrue the tax under the general rule in this ruling?

A: No. Utah had no direct-pay option.

Q: Who ordinarily had to collect the tax?

A: The seller holding the Utah sales-tax license.

Q: Did the buyer's Utah registration certificate make the sale exempt?

A: No.

Q: Why did the Commission excuse the seller on this transaction?

A: Commission staff had given confusing advice, and the transaction had already received specific attention.

Q: What records did the seller need?

A: A signed good-faith customer letter with the tax-license number and an invoice number or other sale link.

Q: Was the exception a general direct-pay authorization?

A: No. The response limited it to this transaction.

Key source language

• General rule: “Utah does not have a direct-pay option under which XXXXX of XXXXX can self-accrue use tax and remit it directly to the Tax Commission.”
• Seller duty: “your company is responsible for collecting, reporting and remitting sales and use tax on items sold to Utah customers.”
• Exception: “because of the attention that has been focused on this particular transaction, we will make an exception”
• Protection: “we will not hold you responsible for any use tax due on this transaction.”

Citations and references

The official response did not cite a statute, regulation, or numbered administrative publication.

Source

• Landing page: Utah Private Letter Rulings
• Official ruling: Utah PLR 96-084
• Reliance note: the documentation exception was expressly limited to the disputed transaction after conflicting Commission advice.
• Fetch note: the exact official URL returned HTTP 404 to a direct request and was then retrieved through Sofya.

Original ruling text

96-084

Response May 23, 1996

Request

April 22, 1996

UTAH STATE TAX COMMISSION

210 NORTH 1950 WEST

SALT LAKE CITY

UTAH 84134

ATTENTION: XXXXX

Dear XXXXX

Re: Responsibility for Remittance of Sales or Use Tax

This letter seeks to clarify our position as a vendor in our responsibility for the collection and remittance of sales/use tax. The following is the situation:

1. We are a out-of-state vendor registered to do business in the State of Utah, filing regular sales tax returns.

2. We sold some equipment from our Denver, Colorado location to our a customer who is registered to do business in the State of Utah. The customer is doing a job there and the equipment purchased are NOT for resale purpose.

3. Since the customer is taxable, we wanted to charge him the Utah sales tax. However, he has given us a letter claiming that he will be responsible for remitting the use tax to Utah State Tax Commission. Upon further pursuit, the customer provided us with a copy of his Utah Sales/Use Tax Registration Certificate.

4. On March 4, 1996, upon my inquiry, I was advised by XXXXX of your Department that as a vendor, we should not report the transaction as non-taxable just based on the customer's letter. He advised that we should get the customer to obtain an exemption number from the Utah State Tax Commission. We then pointed out that the customer is NOT an exempt customer and therefore may have problem applying for such a number. It was then clarified that the customer could apply for this number giving the reason that he will handle the use tax himself Upon our mention that the customer already had a sales/use tax registration number, we were advised that the exemption number required is different from the sales/use tax registration number.

5. We took your Department's advice back to the customer who then spoke with XXXXX recently. The customer had now got back to us that they were told this time by your Department that the Utah Sales/Use Tax Certificate is good enough support for us to report the transaction as non-taxable.

6. I have spoken to XXXXX today to get a tax position on our situation. I had given him our customer's name as XXXXX of XXXXX with the Sales Tax License and/or Use Tax Certificate of Registration Account No. XXXXX.

Based on the above information, may we have a firm and final opinion from your Department as to whether we can accept in good faith the customer's Certificate above, and report the transaction as non-taxable. We want to be sure that we are not liable for any Utah sales that we did not collect and in the event the customer fails to report this taxable purchase and remit the use tax.

We would appreciate your prompt reply so that we can settle this matter with our customer.

Thank you in advance for your assistance.

Respectfully,

XXXXX

May 23, 1996

XXXXX

Re: Advisory Opinion - sales tax on purchases by XXXXX

Dear XXXXX

We have received your request for an opinion as sales to XXXXX of XXXXX. As we understand the transaction, XXXXX of XXXXX purchased scaffolding and other items of tangible personal property from your company for delivery to their job site in Utah. XXXXX of XXXXX is not claiming an exemption of any type, but they have declined to pay the use tax to you, and they have informed you that they will accrue the use tax and remit it themselves. You are concerned about the type of documentation that we require to relieve your company of liability for this tax. We find as follows:

Utah does not have a direct-pay option under which XXXXX of XXXXX can self-accrue use tax and remit it directly to the Tax Commission. Because your company has a Utah sales tax license, XXXXX of XXXXX is required to pay the use tax to your company. Likewise, your company is responsible for collecting, reporting and remitting sales and use tax on items sold to Utah customers.

However, because of the attention that has been focused on this particular transaction, we will make an exception if XXXXX of XXXXX continues to refuse to remit the use tax to you. You may place their signed letter in your tax records as evidence that XXXXX has a Utah sales tax license and that XXXXX certifies it will remit the use tax directly to Utah. The document should include their tax license number and the invoice number or some other means to linking the letter to the sales record. So long as you accept the letter in good faith and keep it in your tax records, we will not hold you responsible for any use tax due on this transaction.

We understand that you made several calls to the Tax Commission and received confusing advice. We apologize for the inconvenience, and we hope this letter will clear up the matter. Please let us know if we can be of further assistance.

For the Commission,

Alice Shearer,

Commissioner