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On March 24, 2012, Utah Governor Gary Herbert signed into law an affiliate nexus bill that will require certain remote sellers to collect and remit Utah sales tax, effective July 1, 2012. An out-of-state seller will be considered to have nexus in Utah if the seller holds a substantial ownership interest in, or is owned in whole or in substantial part, by a related seller, and 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 the place of business 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 the purchaser. Sellers not required to collect and remit tax under this requirement can do so voluntarily. A “related seller” is a seller that meets one or more criteria requiring the seller to collect and remit sales tax and delivers tangible personal property, a service, or a product transferred electronically that is sold by a seller that does not meet the same criteria. Those criteria are that the seller has an office, distribution house, sales house, warehouse, service enterprise or a similar place of business in Utah. The bill also provides that if federal legislation is passed authorizing a state to require certain sellers to collect a sales tax that Utah does not already require a seller to collect, including the currently enacted affiliated nexus seller requirement, sellers will be required to collect and remit the tax to Utah. (H.B. 384, Laws 2012, effective as noted)


In a private letter ruling, the Utah State Tax Commission found that an out-of-state “nexus seller” would not create nexus for an out-of-state “related seller”. In the letter, the nexus seller has an office in Utah as well as employees to support and service its Utah customers. The related seller does not have any retail stores or employees, engage in any Utah activities, or own or lease any real property in Utah. Under these facts, the Commission found that the related seller does not meet Utah’s statutory definition of a retailer engaged in business. On the other hand, since the related seller is an affiliate, further analysis had to be done to determine if the related seller had affiliate nexus instead. The nexus seller was a web-based provider of e-commerce services and did provide the related seller with certain business services for its backend infrastructure, including content delivery network and storage services. However, these services were not provided in Utah. It was therefore determined that the related seller does not have affiliate nexus in Utah based on the types of services performed as long as those services are not directly related to establishing or maintaining a market in Utah for new or existing customers. (Private Letter Ruling, Opinion No. 09-008, Utah State Tax Commission, July 28, 2009)


In a private letter ruling, an out-of-state telemarketing firm, with its sole call center in Utah, was determined to have nexus. The Commissioner also concluded that the firm’s clients, who actually sold the service and maintenance contracts, had nexus as well. The telemarketing firm contended that it did not have nexus because its sole activity was solicitation by e-mail and telephone from the call center in Utah. However, the Commissioner found that the taxpayer’s activities were not just limited to solicitation. The maintenance of a call center in Utah also requires either owning or leasing real property, registering with the Department of Commerce, as well as hiring employees. As a result, the combination of both activities was sufficient to create nexus for the firm. The firm also insisted that nexus was not created for its clients because the firm’s solicitation did not establish and maintain a market for the out-of-state clients. This was also denied because the firm is acting as an agent or independent contractor by soliciting sales. In Utah, an agent or independent contractor with nexus acting on behalf of a seller creates taxable nexus for the seller. (Private Letter Ruling, Opinion No. 08-006, Utah State Tax Commission, released May 2009)



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