When a company has a sales office in one city and stores/ships its product from a warehouse outside that city, which location's sales tax rate applies?

Plain-English summary

An explosives seller had a sales office inside a city, but stored its product at and delivered it from two storage facilities located outside that city's limits, in the surrounding county. After conversations with Commission staff, the company had already updated its sales tax filing (Form TC-71 Schedule A) to reflect the physical location and rate code for the storage facilities rather than the sales office, and asked the Commission to confirm this was correct.

The Commission confirmed it. Under Utah Admin. Code R865-12L-5(C), when a seller has more than one Utah place of business and two or more of those locations participate in a sale, the sale occurs at the place of business where the property is located, or from which it is shipped or delivered -- not automatically at the seller's main sales office. Both the sales office and the storage/warehouse facilities counted as "places of business" that participated in the sale, since the office handled the sale itself while the warehouses held and shipped the actual product. Because the explosives were both stored at and delivered from the out-of-city facilities, those facilities were the place of sale, not the in-city sales office. The applicable rate was therefore the county's rate outside city limits (6% at the time), not the city's own rate.

What this means for you

Businesses with a sales office separate from their warehouse/storage location

If your product is sold from one location but stored and shipped from another, don't assume your main office's local tax rate automatically applies. Under R865-12L-5(C), the rate follows the location where the goods actually sit and ship from when multiple business locations participate in the transaction.

Sellers in areas with different city vs. county sales tax rates

This ruling is a useful, concrete example of how a multi-location sale sources for rate purposes -- worth checking whenever your sales office and your inventory/shipping point sit in different local tax jurisdictions.

Accountants and tax professionals

This is a clean, narrow citation for R865-12L-5(C)'s multiple-place-of-business sourcing test. Note that Utah's sales tax sourcing framework has evolved considerably since 1998 (including destination-based sourcing developments elsewhere in the Code), so confirm this rule and the underlying rate structure are still current before applying this reasoning today.

Common questions

Q: If my sales office and my warehouse are in different tax jurisdictions, which rate applies?
A: Under this ruling, the rate is set by wherever the goods are located and shipped/delivered from, not by the sales office, when both locations participate in the sale.

Q: Does having any office in a city automatically make that city's tax rate apply to all my sales?
A: No, not when a different location within the business actually holds and ships the product -- the storage/shipping location controls under R865-12L-5(C).

Q: Does this ruling apply to my business?
A: No. It binds the Commission only for the requesting company and the facts described. Another taxpayer can't rely on it as binding, though it may carry some persuasive weight in a dispute with closely similar facts.

Citations and references

Rules:

• Utah Admin. Code R865-12L-5(C) (place-of-sale sourcing for multi-location sellers)

Source

• Landing page: https://tax.utah.gov/commission/rulings/
• Original page: https://files.tax.utah.gov/tax/commission/ruling/98-032.htm

Original ruling text

98-032

Response
May 4, 1998

REQUEST
LETTER

February
17, 1998

Dear
Sir or Madam,

We
believe after talking with NAME, the XXXXX Manager and a gentleman in your
offices by the name of Scott Stevens, that because our product is explosives
and is stored in magazines in two locations outside the XXXXX limits, we should
be paying only 6%. I have changed the
actual physical location on the form TC-71 Schedule A, and used a new code
number that was supplied by Mr.
Stevens, The address that was on the Schedule A was the physical address
of our office.

Please
notify me of any problems.

NAME

ADDRESS

CITY
STATE ZIP

May
4, 1998

NAME

ADDRESS

CITY
STATE ZIP

RE: Advisory
Opinion - Place of Sale

Dear
NAME,

We have received your request for an
advisory opinion concerning the sales tax rate that applies to your sales of
explosives. For this opinion, we
understand that you have a sales office in XXXXX, Utah, and two storage
facilities located in XXXXX County outside the XXXXX City limits. The explosives you sell are both stored at
and delivered from these two storage facilities outside XXXXX City. This opinion is valid only for the facts as
thus stated.

Utah Admin. Code R865-12L-5(C)
provides that �[i]f a seller has more than one place of business in Utah, and
if two or more of such locations participate in the sale, the sale occurs at
the place of business where the tangible personal property is located or the
place from which it is shipped or delivered.�
A sales office and a warehouse are both considered a place of business,
and both do participate in your sales.
As the explosives are both stored at and delivered from the storage
facilities outside XXXXX City, the rule provides that the storage facility, and
not the sales office, is the place of sale.

The sales tax rate in XXXXX County
outside the XXXXXX City limits is currently six percent (6%) and is the rate
that should be applied to your sales of explosives. Please contact us if you have any other questions.

For
the Commission,

Joe
B. Pacheco

Commissioner

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