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S.B. 226

             1     

SALES AND USE TAX AMENDMENTS

             2     
2013 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Wayne A. Harper

             5     
House Sponsor: Brad L. Dee

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill addresses the circumstances under which a person may be required to collect
             10      and remit sales and use taxes to the State Tax Commission.
             11      Highlighted Provisions:
             12          This bill:
             13          .    defines terms;
             14          .    modifies the circumstances under which a person may be required to collect and
             15      remit sales and use taxes to the State Tax Commission; and
             16          .    makes technical and conforming changes.
             17      Money Appropriated in this Bill:
             18          None
             19      Other Special Clauses:
             20          This bill takes effect on July 1, 2013.
             21      Utah Code Sections Affected:
             22      AMENDS:
             23          59-1-401, as last amended by Laws of Utah 2012, Chapters 312 and 357
             24          59-12-103.1, as last amended by Laws of Utah 2012, Chapter 312
             25          59-12-107, as last amended by Laws of Utah 2012, Chapters 178, 312, and 399
             26          59-12-211, as last amended by Laws of Utah 2012, Chapter 312
             27          59-12-211.1, as last amended by Laws of Utah 2012, Chapter 312


             28     
             29      Be it enacted by the Legislature of the state of Utah:
             30          Section 1. Section 59-1-401 is amended to read:
             31           59-1-401. Definitions -- Offenses and penalties -- Rulemaking authority -- Statute
             32      of limitations -- Commission authority to waive, reduce, or compromise penalty or
             33      interest.
             34          (1) As used in this section:
             35          (a) "Activated tax, fee, or charge" means a tax, fee, or charge with respect to which the
             36      commission:
             37          (i) has implemented the commission's GenTax system; and
             38          (ii) at least 30 days before implementing the commission's GenTax system as described
             39      in Subsection (1)(a)(i), has provided notice in a conspicuous place on the commission's website
             40      stating:
             41          (A) the date the commission will implement the GenTax system with respect to the tax,
             42      fee, or charge; and
             43          (B) that, at the time the commission implements the GenTax system with respect to the
             44      tax, fee, or charge:
             45          (I) a person that files a return after the due date as described in Subsection (2)(a) is
             46      subject to the penalty described in Subsection (2)(c)(ii); and
             47          (II) a person that fails to pay the tax, fee, or charge as described in Subsection (3)(a) is
             48      subject to the penalty described in Subsection (3)(b)(ii).
             49          (b) "Activation date for a tax, fee, or charge" means with respect to a tax, fee, or
             50      charge, the later of:
             51          (i) the date on which the commission implements the commission's GenTax system
             52      with respect to the tax, fee, or charge; or
             53          (ii) 30 days after the date the commission provides the notice described in Subsection
             54      (1)(a)(ii) with respect to the tax, fee, or charge.
             55          (c) (i) Except as provided in Subsection (1)(c)(ii), "tax, fee, or charge" means:
             56          (A) a tax, fee, or charge the commission administers under:
             57          (I) this title;
             58          (II) Title 10, Chapter 1, Part 3, Municipal Energy Sales and Use Tax Act;


             59          (III) Title 10, Chapter 1, Part 4, Municipal Telecommunications License Tax Act;
             60          (IV) Section 19-6-410.5 ;
             61          (V) Section 19-6-714 ;
             62          (VI) Section 19-6-805 ;
             63          (VII) Section 32B-2-304 ;
             64          (VIII) Section 34A-2-202 ;
             65          (IX) Section 40-6-14 ;
             66          (X) Section 69-2-5 ;
             67          (XI) Section 69-2-5.5 ; or
             68          (XII) Section 69-2-5.6 ; or
             69          (B) another amount that by statute is subject to a penalty imposed under this section.
             70          (ii) "Tax, fee, or charge" does not include a tax, fee, or charge imposed under:
             71          (A) Title 41, Chapter 1a, Motor Vehicle Act, except for Section 41-1a-301 ;
             72          (B) Title 41, Chapter 3, Motor Vehicle Business Regulation Act;
             73          (C) Chapter 2, Property Tax Act, except for Section 59-2-1309 ;
             74          (D) Chapter 3, Tax Equivalent Property Act; or
             75          (E) Chapter 4, Privilege Tax.
             76          (d) "Unactivated tax, fee, or charge" means a tax, fee, or charge except for an activated
             77      tax, fee, or charge.
             78          (2) (a) The due date for filing a return is:
             79          (i) if the person filing the return is not allowed by law an extension of time for filing
             80      the return, the day on which the return is due as provided by law; or
             81          (ii) if the person filing the return is allowed by law an extension of time for filing the
             82      return, the earlier of:
             83          (A) the date the person files the return; or
             84          (B) the last day of that extension of time as allowed by law.
             85          (b) A penalty in the amount described in Subsection (2)(c) is imposed if a person files a
             86      return after the due date described in Subsection (2)(a).
             87          (c) For purposes of Subsection (2)(b), the penalty is an amount equal to the greater of:
             88          (i) if the return described in Subsection (2)(b) is filed with respect to an unactivated
             89      tax, fee, or charge:


             90          (A) $20; or
             91          (B) 10% of the unpaid unactivated tax, fee, or charge due on the return; or
             92          (ii) if the return described in Subsection (2)(b) is filed with respect to an activated tax,
             93      fee, or charge, beginning on the activation date for the tax, fee, or charge:
             94          (A) $20; or
             95          (B) (I) 2% of the unpaid activated tax, fee, or charge due on the return if the return is
             96      filed no later than five days after the due date described in Subsection (2)(a);
             97          (II) 5% of the unpaid activated tax, fee, or charge due on the return if the return is filed
             98      more than five days after the due date but no later than 15 days after the due date described in
             99      Subsection (2)(a); or
             100          (III) 10% of the unpaid activated tax, fee, or charge due on the return if the return is
             101      filed more than 15 days after the due date described in Subsection (2)(a).
             102          (d) This Subsection (2) does not apply to:
             103          (i) an amended return; or
             104          (ii) a return with no tax due.
             105          (3) (a) A person is subject to a penalty for failure to pay a tax, fee, or charge if:
             106          (i) the person files a return on or before the due date for filing a return described in
             107      Subsection (2)(a), but fails to pay the tax, fee, or charge due on the return on or before that due
             108      date;
             109          (ii) the person:
             110          (A) is subject to a penalty under Subsection (2)(b); and
             111          (B) fails to pay the tax, fee, or charge due on a return within a 90-day period after the
             112      due date for filing a return described in Subsection (2)(a);
             113          (iii) (A) the person is subject to a penalty under Subsection (2)(b); and
             114          (B) the commission estimates an amount of tax due for that person in accordance with
             115      Subsection 59-1-1406 (2);
             116          (iv) the person:
             117          (A) is mailed a notice of deficiency; and
             118          (B) within a 30-day period after the day on which the notice of deficiency described in
             119      Subsection (3)(a)(iv)(A) is mailed:
             120          (I) does not file a petition for redetermination or a request for agency action; and


             121          (II) fails to pay the tax, fee, or charge due on a return;
             122          (v) (A) the commission:
             123          (I) issues an order constituting final agency action resulting from a timely filed petition
             124      for redetermination or a timely filed request for agency action; or
             125          (II) is considered to have denied a request for reconsideration under Subsection
             126      63G-4-302 (3)(b) resulting from a timely filed petition for redetermination or a timely filed
             127      request for agency action; and
             128          (B) the person fails to pay the tax, fee, or charge due on a return within a 30-day period
             129      after the date the commission:
             130          (I) issues the order constituting final agency action described in Subsection
             131      (3)(a)(v)(A)(I); or
             132          (II) is considered to have denied the request for reconsideration described in
             133      Subsection (3)(a)(v)(A)(II); or
             134          (vi) the person fails to pay the tax, fee, or charge within a 30-day period after the date
             135      of a final judicial decision resulting from a timely filed petition for judicial review.
             136          (b) For purposes of Subsection (3)(a), the penalty is an amount equal to the greater of:
             137          (i) if the failure to pay a tax, fee, or charge as described in Subsection (3)(a) is with
             138      respect to an unactivated tax, fee, or charge:
             139          (A) $20; or
             140          (B) 10% of the unpaid unactivated tax, fee, or charge due on the return; or
             141          (ii) if the failure to pay a tax, fee, or charge as described in Subsection (3)(a) is with
             142      respect to an activated tax, fee, or charge, beginning on the activation date:
             143          (A) $20; or
             144          (B) (I) 2% of the unpaid activated tax, fee, or charge due on the return if the activated
             145      tax, fee, or charge due on the return is paid no later than five days after the due date for filing a
             146      return described in Subsection (2)(a);
             147          (II) 5% of the unpaid activated tax, fee, or charge due on the return if the activated tax,
             148      fee, or charge due on the return is paid more than five days after the due date for filing a return
             149      described in Subsection (2)(a) but no later than 15 days after that due date; or
             150          (III) 10% of the unpaid activated tax, fee, or charge due on the return if the activated
             151      tax, fee, or charge due on the return is paid more than 15 days after the due date for filing a


             152      return described in Subsection (2)(a).
             153          (4) (a) Beginning January 1, 1995, in the case of any underpayment of estimated tax or
             154      quarterly installments required by Sections 59-5-107 , 59-5-207 , 59-7-504 , and 59-9-104 , there
             155      shall be added a penalty in an amount determined by applying the interest rate provided under
             156      Section 59-1-402 plus four percentage points to the amount of the underpayment for the period
             157      of the underpayment.
             158          (b) (i) For purposes of Subsection (4)(a), the amount of the underpayment shall be the
             159      excess of the required installment over the amount, if any, of the installment paid on or before
             160      the due date for the installment.
             161          (ii) The period of the underpayment shall run from the due date for the installment to
             162      whichever of the following dates is the earlier:
             163          (A) the original due date of the tax return, without extensions, for the taxable year; or
             164          (B) with respect to any portion of the underpayment, the date on which that portion is
             165      paid.
             166          (iii) For purposes of this Subsection (4), a payment of estimated tax shall be credited
             167      against unpaid required installments in the order in which the installments are required to be
             168      paid.
             169          (5) (a) Notwithstanding Subsection (2) and except as provided in Subsection (6), a
             170      person allowed by law an extension of time for filing a corporate franchise or income tax return
             171      under Chapter 7, Corporate Franchise and Income Taxes, or an individual income tax return
             172      under Chapter 10, Individual Income Tax Act, is subject to a penalty in the amount described in
             173      Subsection (5)(b) if, on or before the day on which the return is due as provided by law, not
             174      including the extension of time, the person fails to pay:
             175          (i) for a person filing a corporate franchise or income tax return under Chapter 7,
             176      Corporate Franchise and Income Taxes, the payment required by Subsection 59-7-507 (1)(b); or
             177          (ii) for a person filing an individual income tax return under Chapter 10, Individual
             178      Income Tax Act, the payment required by Subsection 59-10-516 (2).
             179          (b) For purposes of Subsection (5)(a), the penalty per month during the period of the
             180      extension of time for filing the return is an amount equal to 2% of the tax due on the return,
             181      unpaid as of the day on which the return is due as provided by law.
             182          (6) If a person does not file a return within an extension of time allowed by Section


             183      59-7-505 or 59-10-516 , the person:
             184          (a) is not subject to a penalty in the amount described in Subsection (5)(b); and
             185          (b) is subject to a penalty in an amount equal to the sum of:
             186          (i) a late file penalty in an amount equal to the greater of:
             187          (A) $20; or
             188          (B) 10% of the tax due on the return, unpaid as of the day on which the return is due as
             189      provided by law, not including the extension of time; and
             190          (ii) a late pay penalty in an amount equal to the greater of:
             191          (A) $20; or
             192          (B) 10% of the unpaid tax due on the return, unpaid as of the day on which the return is
             193      due as provided by law, not including the extension of time.
             194          (7) (a) Additional penalties for an underpayment of a tax, fee, or charge are as provided
             195      in this Subsection (7)(a).
             196          (i) Except as provided in Subsection (7)(c), if any portion of an underpayment of a tax,
             197      fee, or charge is due to negligence, the penalty is 10% of the portion of the underpayment that
             198      is due to negligence.
             199          (ii) Except as provided in Subsection (7)(d), if any portion of an underpayment of a
             200      tax, fee, or charge is due to intentional disregard of law or rule, the penalty is 15% of the entire
             201      underpayment.
             202          (iii) If any portion of an underpayment is due to an intent to evade a tax, fee, or charge,
             203      the penalty is the greater of $500 per period or 50% of the entire underpayment.
             204          (iv) If any portion of an underpayment is due to fraud with intent to evade a tax, fee, or
             205      charge, the penalty is the greater of $500 per period or 100% of the entire underpayment.
             206          (b) If the commission determines that a person is liable for a penalty imposed under
             207      Subsection (7)(a)(ii), (iii), or (iv), the commission shall notify the person of the proposed
             208      penalty.
             209          (i) The notice of proposed penalty shall:
             210          (A) set forth the basis of the assessment; and
             211          (B) be mailed by certified mail, postage prepaid, to the person's last-known address.
             212          (ii) Upon receipt of the notice of proposed penalty, the person against whom the
             213      penalty is proposed may:


             214          (A) pay the amount of the proposed penalty at the place and time stated in the notice;
             215      or
             216          (B) proceed in accordance with the review procedures of Subsection (7)(b)(iii).
             217          (iii) A person against whom a penalty is proposed in accordance with this Subsection
             218      (7) may contest the proposed penalty by filing a petition for an adjudicative proceeding with
             219      the commission.
             220          (iv) (A) If the commission determines that a person is liable for a penalty under this
             221      Subsection (7), the commission shall assess the penalty and give notice and demand for
             222      payment.
             223          (B) The commission shall mail the notice and demand for payment described in
             224      Subsection (7)(b)(iv)(A):
             225          (I) to the person's last-known address; and
             226          (II) in accordance with Section 59-1-1404 .
             227          (c) A seller that voluntarily collects a tax under Subsection 59-12-107 (2)[(d)](f) is not
             228      subject to the penalty under Subsection (7)(a)(i) if on or after July 1, 2001:
             229          (i) a court of competent jurisdiction issues a final unappealable judgment or order
             230      determining that:
             231          (A) the seller meets one or more of the criteria described in Subsection 59-12-107 (2)(a)
             232      or is a seller required to pay or collect and remit sales and use taxes under Subsection
             233      59-12-107 (2)(b) or (2)(d); and
             234          (B) the commission or a county, city, or town may require the seller to collect a tax
             235      under Subsections 59-12-103 (2)(a) through (d); or
             236          (ii) the commission issues a final unappealable administrative order determining that:
             237          (A) the seller meets one or more of the criteria described in Subsection 59-12-107 (2)(a)
             238      or is a seller required to pay or collect and remit sales and use taxes under Subsection
             239      59-12-107 (2)(b) or (2)(d); and
             240          (B) the commission or a county, city, or town may require the seller to collect a tax
             241      under Subsections 59-12-103 (2)(a) through (d).
             242          (d) A seller that voluntarily collects a tax under Subsection 59-12-107 (2)[(d)](f) is not
             243      subject to the penalty under Subsection (7)(a)(ii) if:
             244          (i) (A) a court of competent jurisdiction issues a final unappealable judgment or order


             245      determining that:
             246          (I) the seller meets one or more of the criteria described in Subsection 59-12-107 (2)(a)
             247      or is a seller required to pay or collect and remit sales and use taxes under Subsection
             248      59-12-107 (2)(b) or (2)(d); and
             249          (II) the commission or a county, city, or town may require the seller to collect a tax
             250      under Subsections 59-12-103 (2)(a) through (d); or
             251          (B) the commission issues a final unappealable administrative order determining that:
             252          (I) the seller meets one or more of the criteria described in Subsection 59-12-107 (2)(a)
             253      or is a seller required to pay or collect and remit sales and use taxes under Subsection
             254      59-12-107 (2)(b) or (2)(d); and
             255          (II) the commission or a county, city, or town may require the seller to collect a tax
             256      under Subsections 59-12-103 (2)(a) through (d); and
             257          (ii) the seller's intentional disregard of law or rule is warranted by existing law or by a
             258      nonfrivolous argument for the extension, modification, or reversal of existing law or the
             259      establishment of new law.
             260          (8) The penalty for failure to file an information return, information report, or a
             261      complete supporting schedule is $50 for each information return, information report, or
             262      supporting schedule up to a maximum of $1,000.
             263          (9) If a person, in furtherance of a frivolous position, has a prima facie intent to delay
             264      or impede administration of a law relating to a tax, fee, or charge and files a purported return
             265      that fails to contain information from which the correctness of reported tax, fee, or charge
             266      liability can be determined or that clearly indicates that the tax, fee, or charge liability shown is
             267      substantially incorrect, the penalty is $500.
             268          (10) (a) A seller that fails to remit a tax, fee, or charge monthly as required by
             269      Subsection 59-12-108 (1)(a):
             270          (i) is subject to a penalty described in Subsection (2); and
             271          (ii) may not retain the percentage of sales and use taxes that would otherwise be
             272      allowable under Subsection 59-12-108 (2).
             273          (b) A seller that fails to remit a tax, fee, or charge by electronic funds transfer as
             274      required by Subsection 59-12-108 (1)(a)(ii)(B):
             275          (i) is subject to a penalty described in Subsection (2); and


             276          (ii) may not retain the percentage of sales and use taxes that would otherwise be
             277      allowable under Subsection 59-12-108 (2).
             278          (11) (a) A person is subject to the penalty provided in Subsection (11)(c) if that person:
             279          (i) commits an act described in Subsection (11)(b) with respect to one or more of the
             280      following documents:
             281          (A) a return;
             282          (B) an affidavit;
             283          (C) a claim; or
             284          (D) a document similar to Subsections (11)(a)(i)(A) through (C);
             285          (ii) knows or has reason to believe that the document described in Subsection (11)(a)(i)
             286      will be used in connection with any material matter administered by the commission; and
             287          (iii) knows that the document described in Subsection (11)(a)(i), if used in connection
             288      with any material matter administered by the commission, would result in an understatement of
             289      another person's liability for a tax, fee, or charge.
             290          (b) The following acts apply to Subsection (11)(a)(i):
             291          (i) preparing any portion of a document described in Subsection (11)(a)(i);
             292          (ii) presenting any portion of a document described in Subsection (11)(a)(i);
             293          (iii) procuring any portion of a document described in Subsection (11)(a)(i);
             294          (iv) advising in the preparation or presentation of any portion of a document described
             295      in Subsection (11)(a)(i);
             296          (v) aiding in the preparation or presentation of any portion of a document described in
             297      Subsection (11)(a)(i);
             298          (vi) assisting in the preparation or presentation of any portion of a document described
             299      in Subsection (11)(a)(i); or
             300          (vii) counseling in the preparation or presentation of any portion of a document
             301      described in Subsection (11)(a)(i).
             302          (c) For purposes of Subsection (11)(a), the penalty:
             303          (i) shall be imposed by the commission;
             304          (ii) is $500 for each document described in Subsection (11)(a)(i) with respect to which
             305      the person described in Subsection (11)(a) meets the requirements of Subsection (11)(a); and
             306          (iii) is in addition to any other penalty provided by law.


             307          (d) The commission may seek a court order to enjoin a person from engaging in
             308      conduct that is subject to a penalty under this Subsection (11).
             309          (e) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             310      commission may make rules prescribing the documents that are similar to Subsections
             311      (11)(a)(i)(A) through (C).
             312          (12) (a) As provided in Section 76-8-1101 , criminal offenses and penalties are as
             313      provided in Subsections (12)(b) through (e).
             314          (b) (i) A person who is required by this title or any laws the commission administers or
             315      regulates to register with or obtain a license or permit from the commission, who operates
             316      without having registered or secured a license or permit, or who operates when the registration,
             317      license, or permit is expired or not current, is guilty of a class B misdemeanor.
             318          (ii) Notwithstanding Section 76-3-301 , for purposes of Subsection (12)(b)(i), the
             319      penalty may not:
             320          (A) be less than $500; or
             321          (B) exceed $1,000.
             322          (c) (i) A person who, with intent to evade a tax, fee, or charge or requirement of this
             323      title or any lawful requirement of the commission, fails to make, render, sign, or verify a return
             324      or to supply information within the time required by law, or who makes, renders, signs, or
             325      verifies a false or fraudulent return or statement, or who supplies false or fraudulent
             326      information, is guilty of a third degree felony.
             327          (ii) Notwithstanding Section 76-3-301 , for purposes of Subsection (12)(c)(i), the
             328      penalty may not:
             329          (A) be less than $1,000; or
             330          (B) exceed $5,000.
             331          (d) (i) A person who intentionally or willfully attempts to evade or defeat a tax, fee, or
             332      charge or the payment of a tax, fee, or charge is, in addition to other penalties provided by law,
             333      guilty of a second degree felony.
             334          (ii) Notwithstanding Section 76-3-301 , for purposes of Subsection (12)(d)(i), the
             335      penalty may not:
             336          (A) be less than $1,500; or
             337          (B) exceed $25,000.


             338          (e) (i) A person is guilty of a second degree felony if that person commits an act:
             339          (A) described in Subsection (12)(e)(ii) with respect to one or more of the following
             340      documents:
             341          (I) a return;
             342          (II) an affidavit;
             343          (III) a claim; or
             344          (IV) a document similar to Subsections (12)(e)(i)(A)(I) through (III); and
             345          (B) subject to Subsection (12)(e)(iii), with knowledge that the document described in
             346      Subsection (12)(e)(i)(A):
             347          (I) is false or fraudulent as to any material matter; and
             348          (II) could be used in connection with any material matter administered by the
             349      commission.
             350          (ii) The following acts apply to Subsection (12)(e)(i):
             351          (A) preparing any portion of a document described in Subsection (12)(e)(i)(A);
             352          (B) presenting any portion of a document described in Subsection (12)(e)(i)(A);
             353          (C) procuring any portion of a document described in Subsection (12)(e)(i)(A);
             354          (D) advising in the preparation or presentation of any portion of a document described
             355      in Subsection (12)(e)(i)(A);
             356          (E) aiding in the preparation or presentation of any portion of a document described in
             357      Subsection (12)(e)(i)(A);
             358          (F) assisting in the preparation or presentation of any portion of a document described
             359      in Subsection (12)(e)(i)(A); or
             360          (G) counseling in the preparation or presentation of any portion of a document
             361      described in Subsection (12)(e)(i)(A).
             362          (iii) This Subsection (12)(e) applies:
             363          (A) regardless of whether the person for which the document described in Subsection
             364      (12)(e)(i)(A) is prepared or presented:
             365          (I) knew of the falsity of the document described in Subsection (12)(e)(i)(A); or
             366          (II) consented to the falsity of the document described in Subsection (12)(e)(i)(A); and
             367          (B) in addition to any other penalty provided by law.
             368          (iv) Notwithstanding Section 76-3-301 , for purposes of this Subsection (12)(e), the


             369      penalty may not:
             370          (A) be less than $1,500; or
             371          (B) exceed $25,000.
             372          (v) The commission may seek a court order to enjoin a person from engaging in
             373      conduct that is subject to a penalty under this Subsection (12)(e).
             374          (vi) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act,
             375      the commission may make rules prescribing the documents that are similar to Subsections
             376      (12)(e)(i)(A)(I) through (III).
             377          (f) The statute of limitations for prosecution for a violation of this Subsection (12) is
             378      the later of six years:
             379          (i) from the date the tax should have been remitted; or
             380          (ii) after the day on which the person commits the criminal offense.
             381          (13) Upon making a record of its actions, and upon reasonable cause shown, the
             382      commission may waive, reduce, or compromise any of the penalties or interest imposed under
             383      this part.
             384          Section 2. Section 59-12-103.1 is amended to read:
             385           59-12-103.1. Action by Supreme Court of the United States authorizing or action
             386      by Congress permitting a state to require certain sellers to collect a sales or use tax --
             387      Collection of tax by commission -- Commission report to Revenue and Taxation Interim
             388      Committee -- Revenue and Taxation Interim Committee study.
             389          (1) Except as provided in Section 59-12-107.1 , a seller shall remit a tax to the
             390      commission as provided in Section 59-12-107 if:
             391          (a) the Supreme Court of the United States issues a decision authorizing a state to
             392      require the following sellers to collect a sales or use tax:
             393          (i) a seller that does not meet one or more of the criteria described in Subsection
             394      59-12-107 (2)(a); or
             395          (ii) a seller that is not a seller required to pay or collect and remit sales and use taxes
             396      under Subsection 59-12-107 (2)(b) or (2)(d); or
             397          (b) Congress permits the state to require the following sellers to collect a sales or use
             398      tax:
             399          (i) a seller that does not meet one or more of the criteria described in Subsection


             400      59-12-107 (2)(a); or
             401          (ii) a seller that is not a seller required to pay or collect and remit sales and use taxes
             402      under Subsection 59-12-107 (2)(b) or (2)(d).
             403          (2) The commission shall:
             404          (a) collect the tax described in Subsection (1) from the seller:
             405          (i) to the extent:
             406          (A) authorized by the Supreme Court of the United States; or
             407          (B) permitted by Congress; and
             408          (ii) beginning on the first day of a calendar quarter as prescribed by the Revenue and
             409      Taxation Interim Committee; and
             410          (b) make a report to the Revenue and Taxation Interim Committee:
             411          (i) regarding the actions taken by:
             412          (A) the Supreme Court of the United States; or
             413          (B) Congress; and
             414          (ii) at the Revenue and Taxation Interim Committee meeting immediately following
             415      the day on which the Supreme Court of the United States' or Congress' actions become
             416      effective.
             417          (3) The Revenue and Taxation Interim Committee shall after hearing the commission's
             418      report under Subsection (2)(b):
             419          (a) review the actions taken by:
             420          (i) the Supreme Court of the United States; or
             421          (ii) Congress;
             422          (b) direct the commission regarding the day on which the commission is required to
             423      collect the tax described in Subsection (1); and
             424          (c) make recommendations to the Legislative Management Committee:
             425          (i) regarding whether as a result of the Supreme Court of the United States' or
             426      Congress' actions any provisions of this chapter should be amended or repealed; and
             427          (ii) within a one-year period after the day on which the commission makes a report
             428      under Subsection (2)(b).
             429          Section 3. Section 59-12-107 is amended to read:
             430           59-12-107. Definitions -- Collection, remittance, and payment of tax by sellers or


             431      other persons -- Returns -- Reports -- Direct payment by purchaser of vehicle -- Other
             432      liability for collection -- Rulemaking authority -- Credits -- Treatment of bad debt --
             433      Penalties and interest.
             434          (1) As used in this section:
             435          (a) (i) "Advertising" means:
             436          (A) announcing tangible personal property, a service, or a product transferred
             437      electronically for sale by graphic, pictorial, verbal, written, or other similar means; or
             438          (B) employing purchased space or time in print or electronic media if that purchased
             439      space or time is given to communicate an announcement of tangible personal property, a
             440      service, or a product transferred electronically for sale.
             441          (ii) "Advertising" includes online advertising.
             442          (b) "Affiliate" means:
             443          (i) a person that is a member of the same controlled group of corporations as a seller;
             444      or
             445          (ii) another entity that, regardless of how the entity is organized, bears the same
             446      ownership relationship to a seller as a corporation that is a member of the same controlled
             447      group of corporations.
             448          (c) "Controlled group of corporations" is as defined in Section 1563(a), Internal
             449      Revenue Code.
             450          (d) "Online advertising" includes:
             451          (i) email communication, generated as a result of generic algorithmic functions that are
             452      anonymous and passive in nature;
             453          (ii) an advertisement tied to an Internet search engine;
             454          (iii) a banner advertisement;
             455          (iv) a click-through advertisement;
             456          (v) a cost-per-action advertisement;
             457          (vi) a link to a seller's website; or
             458          (vii) an online advertising service similar to Subsections (1)(d)(i) through (vi) as the
             459      commission may define by rule made in accordance with Title 63G, Chapter 3, Utah
             460      Administrative Rulemaking Act.
             461          [(a)] (e) "Ownership" means direct ownership or indirect ownership through a parent,


             462      subsidiary, or affiliate.
             463          [(b)] (f) "Related seller" means a seller that:
             464          (i) meets one or more of the criteria described in Subsection (2)(a)(i); and
             465          (ii) delivers tangible personal property, a service, or a product transferred electronically
             466      that is sold:
             467          (A) by a seller that does not meet one or more of the criteria described in Subsection
             468      (2)(a)(i); and
             469          (B) to a purchaser in the state.
             470          (g) (i) "Solicit" means to communicate directly or indirectly to a specific person within
             471      the state in a manner that is intended to and calculated to incite the person to purchase tangible
             472      personal property, a service, or a product transferred electronically from a specific seller.
             473          (ii) "Solicit" does not include online advertising.
             474          [(c)] (h) "Substantial ownership interest" means an ownership interest in a business
             475      entity if that ownership interest is greater than the degree of ownership of equity interest
             476      specified in 15 U.S.C. Sec. 78p, with respect to a person other than a director or an officer.
             477          (2) (a) Except as provided in Subsection (2)[(e)](h), Section 59-12-107.1 , or Section
             478      59-12-123 , and subject to Subsection (2)[(f)](i), each seller shall pay or collect and remit the
             479      sales and use taxes imposed by this chapter if within this state the seller:
             480          (i) has or utilizes:
             481          (A) an office;
             482          (B) a distribution house;
             483          (C) a sales house;
             484          (D) a warehouse;
             485          (E) a service enterprise; or
             486          (F) a place of business similar to Subsections (2)(a)(i)(A) through (E);
             487          (ii) maintains a stock of goods;
             488          (iii) regularly solicits orders, regardless of whether or not the orders are accepted in the
             489      state, unless the seller's only activity in the state is:
             490          (A) advertising; or
             491          (B) [solicitation] to solicit by:
             492          (I) direct mail;


             493          (II) electronic mail;
             494          (III) except as provided in Subsection (2)(d), the Internet;
             495          (IV) telecommunications service; or
             496          (V) a means similar to Subsection (2)(a)(iii)(A) or (B);
             497          (iv) regularly engages in the delivery of property in the state other than by:
             498          (A) common carrier; or
             499          (B) United States mail; or
             500          (v) regularly engages in an activity directly related to the leasing or servicing of
             501      property located within the state.
             502          (b) [A] There is a rebuttable presumption that a seller is considered to be engaged in
             503      the business of selling tangible personal property, a service, or a product transferred
             504      electronically for use in the state, and shall pay or collect and remit the sales and use taxes
             505      imposed by this chapter if:
             506          (i) the seller:
             507          (A) holds a substantial ownership interest in[, or] a related seller;
             508          (B) is owned in whole or in substantial part by, a related seller; [and] or
             509          (C) is an affiliate of a seller who meets one or more of the criteria described in
             510      Subsection (2)(a); and
             511          (ii) (A) the seller sells the same or a substantially similar line of products as the related
             512      seller and does so under the same or a substantially similar business name; [or]
             513          (B) the place of business described in Subsection (2)(a)(i) of the related seller or an
             514      in-state employee of the related seller is used to advertise, promote, or facilitate sales by the
             515      seller to a purchaser[.];
             516          (C) the place of business described in Subsection (2)(a)(i) of the related seller or an
             517      in-state employee of the related seller is used to deliver tangible personal property, a service, or
             518      a product transferred electronically by the seller to a purchaser;
             519          (D) a related seller delivers, installs, assembles, or performs maintenance services for
             520      the seller's purchasers within the state;
             521          (E) a related seller facilitates the seller's delivery of tangible personal property to a
             522      purchaser in the state by allowing the purchaser to pick up the tangible personal property sold
             523      by the seller at a location described in Subsection (2)(a)(i) that is maintained by the related


             524      seller; or
             525          (F) a related seller conducts another activity in the state that is significantly associated
             526      with the seller's ability to establish and maintain a market in the state for the seller's sales of
             527      tangible personal property, a service, or a product transferred electronically.
             528          (c) For purposes of Subsection (2)(b), a presumption may be rebutted by demonstrating
             529      that the activities in this state of an affiliate or a related seller are not significantly associated
             530      with the seller's ability to establish and maintain a market in the state for the seller's sales of
             531      tangible personal property, a service, or a product transferred electronically.
             532          (d) (i) Subject to the other provisions of this Subsection (2)(d), there is a rebuttable
             533      presumption that a seller is engaged in the business of selling tangible personal property, a
             534      service, or a product transferred electronically in the state if:
             535          (A) the seller enters into an agreement with another person in this state, for a
             536      commission or other consideration, to refer a potential purchaser of the tangible personal
             537      property, service, or product transferred electronically to the seller in a manner described in
             538      Subsection (2)(d)(ii);
             539          (B) the total taxable sales from all of the seller's sales of tangible personal property,
             540      services, and products transferred electronically, for the preceding 12 months, to purchasers in
             541      the state that are referred in accordance with an agreement described in Subsection (2)(d)(i)(A),
             542      exceeds $10,000; and
             543          (C) the seller's total taxable sales of tangible personal property, services, and products
             544      transferred electronically, for the preceding 12 months, to purchasers in the state, exceed
             545      $125,000.
             546          (ii) For purposes of Subsection (2)(d)(i), a referral:
             547          (A) includes a referral made by an Internet-based link, an Internet website, or other
             548      similar means; and
             549          (B) does not include online advertising.
             550          (iii) For purposes of Subsection (2)(d)(i), an agreement described in Subsection
             551      (2)(d)(i) does not include an agreement under which a seller purchases advertising from a
             552      person in the state, unless the person who enters into the agreement with the seller also solicits
             553      one or more potential customers in the state as described in Subsection (2)(d)(iv).
             554          (iv) For purposes of Subsection (2)(d)(iii), a person is considered to solicit one or more


             555      potential customers in the state if:
             556          (A) the person directs the solicitation at a resident of the state;
             557          (B) the solicitation originates from within the state; and
             558          (C) the solicitation is made by a person in the state.
             559          (v) For purposes of Subsection (2)(d)(i), a presumption may be rebutted by proving as
             560      provided in Subsection (2)(d)(vi) that a person with whom a seller has entered into an
             561      agreement has not engaged in an activity within the state that is significantly associated with
             562      the seller's ability to establish and maintain a market in the state, within the preceding 12
             563      months, for the seller's sales of tangible personal property, a service, or a product transferred
             564      electronically.
             565          (vi) For purposes of Subsection (2)(d)(v), proof may be made by obtaining written
             566      sworn statements, made in good faith, from all of the persons with whom the seller has entered
             567      into an agreement, stating that the persons have not engaged in an activity within the state that
             568      is significantly associated with the seller's ability to establish and maintain a market in the
             569      state, within the preceding 12 months, for the seller's sales of tangible personal property, a
             570      service, or a product transferred electronically.
             571          (e) The use of a computer located in this state by a seller to create, maintain, or take an
             572      order through a web page, website, Internet post, Internet listing, or online marketplace may not
             573      be considered as a factor in determining whether the seller is required to pay or collect and
             574      remit sales and use taxes under this Subsection (2), unless the seller owns or leases the
             575      computer.
             576          [(c)] (f) A seller that does not meet one or more of the criteria provided for in
             577      Subsection (2)(a) or is not a seller required to pay or collect and remit sales and use taxes under
             578      Subsection (2)(b) or (2)(d):
             579          (i) except as provided in Subsection (2)[(c)](f)(ii), may voluntarily:
             580          (A) collect a tax on a transaction described in Subsection 59-12-103 (1); and
             581          (B) remit the tax to the commission as provided in this part; or
             582          (ii) [notwithstanding Subsection (2)(c)(i),] shall collect a tax on a transaction described
             583      in Subsection 59-12-103 (1) if Section 59-12-103.1 requires the seller to collect the tax.
             584          [(d)] (g) The collection and remittance of a tax under this chapter by a seller that is
             585      registered under the agreement may not be used as a factor in determining whether that seller is


             586      required by Subsection (2) to:
             587          (i) pay a tax, fee, or charge under:
             588          (A) Title 10, Chapter 1, Part 3, Municipal Energy Sales and Use Tax Act;
             589          (B) Title 10, Chapter 1, Part 4, Municipal Telecommunications License Tax Act;
             590          (C) Section 19-6-714 ;
             591          (D) Section 19-6-805 ;
             592          (E) Section 69-2-5 ;
             593          (F) Section 69-2-5.5 ;
             594          (G) Section 69-2-5.6 ; or
             595          (H) this title; or
             596          (ii) collect and remit a tax, fee, or charge under:
             597          (A) Title 10, Chapter 1, Part 3, Municipal Energy Sales and Use Tax Act;
             598          (B) Title 10, Chapter 1, Part 4, Municipal Telecommunications License Tax Act;
             599          (C) Section 19-6-714 ;
             600          (D) Section 19-6-805 ;
             601          (E) Section 69-2-5 ;
             602          (F) Section 69-2-5.5 ;
             603          (G) Section 69-2-5.6 ; or
             604          (H) this title.
             605          [(e)] (h) A person shall pay a use tax imposed by this chapter on a transaction
             606      described in Subsection 59-12-103 (1) if:
             607          (i) the seller did not collect a tax imposed by this chapter on the transaction; and
             608          (ii) the person:
             609          (A) stores the tangible personal property or product transferred electronically in the
             610      state;
             611          (B) uses the tangible personal property or product transferred electronically in the state;
             612      or
             613          (C) consumes the tangible personal property or product transferred electronically in the
             614      state.
             615          [(f)] (i) The ownership of property that is located at the premises of a printer's facility
             616      with which the retailer has contracted for printing and that consists of the final printed product,


             617      property that becomes a part of the final printed product, or copy from which the printed
             618      product is produced, shall not result in the retailer being considered to have or maintain an
             619      office, distribution house, sales house, warehouse, service enterprise, or other place of
             620      business, or to maintain a stock of goods, within this state.
             621          (3) (a) Except as provided in Section 59-12-107.1 , a tax under this chapter shall be
             622      collected from a purchaser.
             623          (b) A seller may not collect as tax an amount, without regard to fractional parts of one
             624      cent, in excess of the tax computed at the rates prescribed by this chapter.
             625          (c) (i) Each seller shall:
             626          (A) give the purchaser a receipt for the tax collected; or
             627          (B) bill the tax as a separate item and declare the name of this state and the seller's
             628      sales and use tax license number on the invoice for the sale.
             629          (ii) The receipt or invoice is prima facie evidence that the seller has collected the tax
             630      and relieves the purchaser of the liability for reporting the tax to the commission as a
             631      consumer.
             632          (d) A seller is not required to maintain a separate account for the tax collected, but is
             633      considered to be a person charged with receipt, safekeeping, and transfer of public money.
             634          (e) Taxes collected by a seller pursuant to this chapter shall be held in trust for the
             635      benefit of the state and for payment to the commission in the manner and at the time provided
             636      for in this chapter.
             637          (f) If any seller, during any reporting period, collects as a tax an amount in excess of
             638      the lawful state and local percentage of total taxable sales allowed under this chapter, the seller
             639      shall remit to the commission the full amount of the tax imposed under this chapter, plus any
             640      excess.
             641          (g) If the accounting methods regularly employed by the seller in the transaction of the
             642      seller's business are such that reports of sales made during a calendar month or quarterly period
             643      will impose unnecessary hardships, the commission may accept reports at intervals that will, in
             644      the commission's opinion, better suit the convenience of the taxpayer or seller and will not
             645      jeopardize collection of the tax.
             646          (h) (i) For a purchase paid with specie legal tender as defined in Section 59-1-1501.1 ,
             647      and until such time as the commission accepts specie legal tender for the payment of a tax


             648      under this chapter, if the commission requires a seller to remit a tax under this chapter in legal
             649      tender other than specie legal tender, the seller shall state on the seller's books and records and
             650      on an invoice, bill of sale, or similar document provided to the purchaser:
             651          (A) the purchase price in specie legal tender and in the legal tender the seller is
             652      required to remit to the commission;
             653          (B) subject to Subsection (3)(h)(ii), the amount of tax due under this chapter in specie
             654      legal tender and in the legal tender the seller is required to remit to the commission;
             655          (C) the tax rate under this chapter applicable to the purchase; and
             656          (D) the date of the purchase.
             657          (ii) (A) Subject to Subsection (3)(h)(ii)(B), for purposes of determining the amount of
             658      tax due under Subsection (3)(h)(i), a seller shall use the most recent London fixing price for the
             659      specie legal tender the purchaser paid.
             660          (B) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             661      commission may make rules for determining the amount of tax due under Subsection (3)(h)(i)
             662      if the London fixing price is not available for a particular day.
             663          (4) (a) Except as provided in Subsections (5) through (7) and Section 59-12-108 , the
             664      sales or use tax imposed by this chapter is due and payable to the commission quarterly on or
             665      before the last day of the month next succeeding each calendar quarterly period.
             666          (b) (i) Each seller shall, on or before the last day of the month next succeeding each
             667      calendar quarterly period, file with the commission a return for the preceding quarterly period.
             668          (ii) The seller shall remit with the return under Subsection (4)(b)(i) the amount of the
             669      tax required under this chapter to be collected or paid for the period covered by the return.
             670          (c) Except as provided in Subsection (5)(c), a return shall contain information and be in
             671      a form the commission prescribes by rule.
             672          (d) (i) Subject to Subsection (4)(d)(ii), the sales tax as computed in the return shall be
             673      based on the total nonexempt sales made during the period for which the return is filed,
             674      including both cash and charge sales.
             675          (ii) For a sale that includes the delivery or installation of tangible personal property at a
             676      location other than a seller's place of business described in Subsection (2)(a)(i), if the delivery
             677      or installation is separately stated on an invoice or receipt, a seller may compute the tax due on
             678      the sale for purposes of Subsection (4)(d)(i) based on the amount the seller receives for that


             679      sale during each period for which the seller receives payment for the sale.
             680          (e) (i) The use tax as computed in the return shall be based on the total amount of
             681      purchases for storage, use, or other consumption in this state made during the period for which
             682      the return is filed, including both cash and charge purchases.
             683          (ii) (A) As used in this Subsection (4)(e)(ii), "qualifying purchaser" means a purchaser
             684      who is required to remit taxes under this chapter, but is not required to remit taxes monthly in
             685      accordance with Section 59-12-108 , and who converts tangible personal property into real
             686      property.
             687          (B) Subject to Subsections (4)(e)(ii)(C) and (D), a qualifying purchaser may remit the
             688      taxes due under this chapter on tangible personal property for which the qualifying purchaser
             689      claims an exemption as allowed under Subsection 59-12-104 (23) or (25) based on the period in
             690      which the qualifying purchaser receives payment, in accordance with Subsection (4)(e)(ii)(C),
             691      for the conversion of the tangible personal property into real property.
             692          (C) A qualifying purchaser remitting taxes due under this chapter in accordance with
             693      Subsection (4)(e)(ii)(B) shall remit an amount equal to the total amount of tax due on the
             694      qualifying purchaser's purchase of the tangible personal property that was converted into real
             695      property multiplied by a fraction, the numerator of which is the payment received in the period
             696      for the qualifying purchaser's sale of the tangible personal property that was converted into real
             697      property and the denominator of which is the entire sales price for the qualifying purchaser's
             698      sale of the tangible personal property that was converted into real property.
             699          (D) A qualifying purchaser may remit taxes due under this chapter in accordance with
             700      this Subsection (4)(e)(ii) only if the books and records that the qualifying purchaser keeps in
             701      the qualifying purchaser's regular course of business identify by reasonable and verifiable
             702      standards that the tangible personal property was converted into real property.
             703          (f) (i) Subject to Subsection (4)(f)(ii) and in accordance with Title 63G, Chapter 3,
             704      Utah Administrative Rulemaking Act, the commission may by rule extend the time for making
             705      returns and paying the taxes.
             706          (ii) An extension under Subsection (4)(f)(i) may not be for more than 90 days.
             707          (g) The commission may require returns and payment of the tax to be made for other
             708      than quarterly periods if the commission considers it necessary in order to ensure the payment
             709      of the tax imposed by this chapter.


             710          (h) (i) The commission may require a seller that files a simplified electronic return with
             711      the commission to file an additional electronic report with the commission.
             712          (ii) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             713      commission may make rules providing:
             714          (A) the information required to be included in the additional electronic report described
             715      in Subsection (4)(h)(i); and
             716          (B) one or more due dates for filing the additional electronic report described in
             717      Subsection (4)(h)(i).
             718          (5) (a) As used in this Subsection (5) and Subsection (6)(b), "remote seller" means a
             719      seller that is:
             720          (i) registered under the agreement;
             721          (ii) described in Subsection (2)[(c)](f); and
             722          (iii) not a:
             723          (A) model 1 seller;
             724          (B) model 2 seller; or
             725          (C) model 3 seller.
             726          (b) (i) Except as provided in Subsection (5)(b)(ii), a tax a remote seller collects in
             727      accordance with Subsection (2)[(c)](f) is due and payable:
             728          (A) to the commission;
             729          (B) annually; and
             730          (C) on or before the last day of the month immediately following the last day of each
             731      calendar year.
             732          (ii) The commission may require that a tax a remote seller collects in accordance with
             733      Subsection (2)[(c)](f) be due and payable:
             734          (A) to the commission; and
             735          (B) on the last day of the month immediately following any month in which the seller
             736      accumulates a total of at least $1,000 in agreement sales and use tax.
             737          (c) (i) If a remote seller remits a tax to the commission in accordance with Subsection
             738      (5)(b), the remote seller shall file a return:
             739          (A) with the commission;
             740          (B) with respect to the tax;


             741          (C) containing information prescribed by the commission; and
             742          (D) on a form prescribed by the commission.
             743          (ii) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             744      commission shall make rules prescribing:
             745          (A) the information required to be contained in a return described in Subsection
             746      (5)(c)(i); and
             747          (B) the form described in Subsection (5)(c)(i)(D).
             748          (d) A tax a remote seller collects in accordance with this Subsection (5) shall be
             749      calculated on the basis of the total amount of taxable transactions under Subsection
             750      59-12-103 (1) the remote seller completes, including:
             751          (i) a cash transaction; and
             752          (ii) a charge transaction.
             753          (6) (a) Except as provided in Subsection (6)(b), a tax a seller that files a simplified
             754      electronic return collects in accordance with this chapter is due and payable:
             755          (i) monthly on or before the last day of the month immediately following the month for
             756      which the seller collects a tax under this chapter; and
             757          (ii) for the month for which the seller collects a tax under this chapter.
             758          (b) A tax a remote seller that files a simplified electronic return collects in accordance
             759      with this chapter is due and payable as provided in Subsection (5).
             760          (7) (a) On each vehicle sale made by other than a regular licensed vehicle dealer, the
             761      purchaser shall pay the sales or use tax directly to the commission if the vehicle is subject to
             762      titling or registration under the laws of this state.
             763          (b) The commission shall collect the tax described in Subsection (7)(a) when the
             764      vehicle is titled or registered.
             765          (8) If any sale of tangible personal property or any other taxable transaction under
             766      Subsection 59-12-103 (1), is made by a wholesaler to a retailer, the wholesaler is not
             767      responsible for the collection or payment of the tax imposed on the sale and the retailer is
             768      responsible for the collection or payment of the tax imposed on the sale if:
             769          (a) the retailer represents that the personal property is purchased by the retailer for
             770      resale; and
             771          (b) the personal property is not subsequently resold.


             772          (9) If any sale of property or service subject to the tax is made to a person prepaying
             773      sales or use tax in accordance with Title 63M, Chapter 5, Resource Development Act, or to a
             774      contractor or subcontractor of that person, the person to whom such payment or consideration
             775      is payable is not responsible for the collection or payment of the sales or use tax and the person
             776      prepaying the sales or use tax is responsible for the collection or payment of the sales or use tax
             777      if the person prepaying the sales or use tax represents that the amount prepaid as sales or use
             778      tax has not been fully credited against sales or use tax due and payable under the rules
             779      promulgated by the commission.
             780          (10) (a) For purposes of this Subsection (10):
             781          (i) Except as provided in Subsection (10)(a)(ii), "bad debt" is as defined in Section
             782      166, Internal Revenue Code.
             783          (ii) Notwithstanding Subsection (10)(a)(i), "bad debt" does not include:
             784          (A) an amount included in the purchase price of tangible personal property, a product
             785      transferred electronically, or a service that is:
             786          (I) not a transaction described in Subsection 59-12-103 (1); or
             787          (II) exempt under Section 59-12-104 ;
             788          (B) a financing charge;
             789          (C) interest;
             790          (D) a tax imposed under this chapter on the purchase price of tangible personal
             791      property, a product transferred electronically, or a service;
             792          (E) an uncollectible amount on tangible personal property or a product transferred
             793      electronically that:
             794          (I) is subject to a tax under this chapter; and
             795          (II) remains in the possession of a seller until the full purchase price is paid;
             796          (F) an expense incurred in attempting to collect any debt; or
             797          (G) an amount that a seller does not collect on repossessed property.
             798          (b) (i) To the extent an amount remitted in accordance with Subsection (4)(d) later
             799      becomes bad debt, a seller may deduct the bad debt from the total amount from which a tax
             800      under this chapter is calculated on a return.
             801          (ii) A qualifying purchaser, as defined in Subsection (4)(e)(ii)(A), may deduct from the
             802      total amount of taxes due under this chapter the amount of tax the qualifying purchaser paid on


             803      the qualifying purchaser's purchase of tangible personal property converted into real property to
             804      the extent that:
             805          (A) tax was remitted in accordance with Subsection (4)(e) on that tangible personal
             806      property converted into real property;
             807          (B) the qualifying purchaser's sale of that tangible personal property converted into real
             808      property later becomes bad debt; and
             809          (C) the books and records that the qualifying purchaser keeps in the qualifying
             810      purchaser's regular course of business identify by reasonable and verifiable standards that the
             811      tangible personal property was converted into real property.
             812          (c) A seller may file a refund claim with the commission if:
             813          (i) the amount of bad debt for the time period described in Subsection (10)(e) exceeds
             814      the amount of the seller's sales that are subject to a tax under this chapter for that same time
             815      period; and
             816          (ii) as provided in Section 59-1-1410 .
             817          (d) A bad debt deduction under this section may not include interest.
             818          (e) A bad debt may be deducted under this Subsection (10) on a return for the time
             819      period during which the bad debt:
             820          (i) is written off as uncollectible in the seller's books and records; and
             821          (ii) would be eligible for a bad debt deduction:
             822          (A) for federal income tax purposes; and
             823          (B) if the seller were required to file a federal income tax return.
             824          (f) If a seller recovers any portion of bad debt for which the seller makes a deduction or
             825      claims a refund under this Subsection (10), the seller shall report and remit a tax under this
             826      chapter:
             827          (i) on the portion of the bad debt the seller recovers; and
             828          (ii) on a return filed for the time period for which the portion of the bad debt is
             829      recovered.
             830          (g) For purposes of reporting a recovery of a portion of bad debt under Subsection
             831      (10)(f), a seller shall apply amounts received on the bad debt in the following order:
             832          (i) in a proportional amount:
             833          (A) to the purchase price of the tangible personal property, product transferred


             834      electronically, or service; and
             835          (B) to the tax due under this chapter on the tangible personal property, product
             836      transferred electronically, or service; and
             837          (ii) to:
             838          (A) interest charges;
             839          (B) service charges; and
             840          (C) other charges.
             841          (h) A seller's certified service provider may make a deduction or claim a refund for bad
             842      debt on behalf of the seller:
             843          (i) in accordance with this Subsection (10); and
             844          (ii) if the certified service provider credits or refunds the entire amount of the bad debt
             845      deduction or refund to the seller.
             846          (i) A seller may allocate bad debt among the states that are members of the agreement
             847      if the seller's books and records support that allocation.
             848          (11) (a) A seller may not, with intent to evade any tax, fail to timely remit the full
             849      amount of tax required by this chapter.
             850          (b) A violation of this section is punishable as provided in Section 59-1-401 .
             851          (c) Each person who fails to pay any tax to the state or any amount of tax required to be
             852      paid to the state, except amounts determined to be due by the commission under Chapter 1,
             853      Part 14, Assessment, Collections, and Refunds Act, or Section 59-12-111 , within the time
             854      required by this chapter, or who fails to file any return as required by this chapter, shall pay, in
             855      addition to the tax, penalties and interest as provided in Sections 59-1-401 and 59-1-402 .
             856          (d) For purposes of prosecution under this section, each quarterly tax period in which a
             857      seller, with intent to evade any tax, collects a tax and fails to timely remit the full amount of the
             858      tax required to be remitted, constitutes a separate offense.
             859          Section 4. Section 59-12-211 is amended to read:
             860           59-12-211. Definitions -- Location of certain transactions -- Reports to
             861      commission -- Direct payment provision for a seller making certain purchases --
             862      Exceptions.
             863          (1) As used in this section:
             864          (a) (i) "Receipt" and "receive" mean:


             865          (A) taking possession of tangible personal property;
             866          (B) making first use of a service; or
             867          (C) for a product transferred electronically, the earlier of:
             868          (I) taking possession of the product transferred electronically; or
             869          (II) making first use of the product transferred electronically.
             870          (ii) "Receipt" and "receive" do not include possession by a shipping company on behalf
             871      of a purchaser.
             872          (b) "Transportation equipment" means:
             873          (i) a locomotive or rail car that is used to carry a person or property in interstate
             874      commerce;
             875          (ii) a truck or truck-tractor:
             876          (A) with a gross vehicle weight rating of 10,001 pounds or more;
             877          (B) registered under Section 41-1a-301 ; and
             878          (C) operated under the authority of a carrier authorized and certificated:
             879          (I) by the United States Department of Transportation or another federal authority; and
             880          (II) to engage in carrying a person or property in interstate commerce;
             881          (iii) a trailer, semitrailer, or passenger bus that is:
             882          (A) registered under Section 41-1a-301 ; and
             883          (B) operated under the authority of a carrier authorized and certificated:
             884          (I) by the United States Department of Transportation or another federal authority; and
             885          (II) to engage in carrying a person or property in interstate commerce;
             886          (iv) an aircraft that is operated by an air carrier authorized and certificated:
             887          (A) by the United States Department of Transportation or another federal or foreign
             888      authority; and
             889          (B) to engage in carrying a person or property in interstate commerce; or
             890          (v) a container designed for use on, or a component part attached or secured on, an
             891      item of equipment listed in Subsections (1)(b)(i) through (iv).
             892          (2) Except as provided in Subsections (8) and (14), if tangible personal property, a
             893      product transferred electronically, or a service that is subject to taxation under this chapter is
             894      received by a purchaser at a business location of a seller, the location of the transaction is the
             895      business location of the seller.


             896          (3) Subject to Subsection (10), and except as provided in Subsections (7), (8), (9), (11),
             897      and (14), if tangible personal property, a product transferred electronically, or a service that is
             898      subject to taxation under this chapter is not received by a purchaser at a business location of a
             899      seller, the location of the transaction is the location where the purchaser takes receipt of the
             900      tangible personal property or service.
             901          (4) Subject to Subsection (10), and except as provided in Subsections (7), (8), (9), (11),
             902      and (14), if Subsection (2) or (3) does not apply, the location of the transaction is the location
             903      indicated by an address for or other information on the purchaser if:
             904          (a) the address or other information is available from the seller's business records; and
             905          (b) use of the address or other information from the seller's records does not constitute
             906      bad faith.
             907          (5) (a) Subject to Subsection (10), and except as provided in Subsections (7), (8), (9),
             908      (11), and (14), if Subsection (2), (3), or (4) does not apply, the location of the transaction is the
             909      location indicated by an address for the purchaser if:
             910          (i) the address is obtained during the consummation of the transaction; and
             911          (ii) use of the address described in Subsection (5)(a)(i) does not constitute bad faith.
             912          (b) An address used under Subsection (5)(a) includes the address of a purchaser's
             913      payment instrument if no other address is available.
             914          (6) Subject to Subsection (10), and except as provided in Subsections (7), (8), (9), (11),
             915      and (14), if Subsection (2), (3), (4), or (5) does not apply or if a seller does not have sufficient
             916      information to apply Subsection (2), (3), (4), or (5), the location of the transaction is the
             917      location:
             918          (a) indicated by the address from which:
             919          (i) except as provided in Subsection (6)(a)(ii), for tangible personal property that is
             920      subject to taxation under this chapter, the tangible personal property is shipped;
             921          (ii) for computer software delivered electronically or for a product transferred
             922      electronically that is subject to taxation under this chapter, the computer software or product
             923      transferred electronically is first available for transmission by the seller; or
             924          (iii) for a service that is subject to taxation under this chapter, the service is provided;
             925      or
             926          (b) as determined by the seller with respect to a prepaid wireless calling service:


             927          (i) provided in Subsection (6)(a)(iii); or
             928          (ii) associated with the mobile telephone number.
             929          (7) (a) For purposes of this Subsection (7), "shared ZIP Code" means a nine-digit ZIP
             930      Code that is located within two or more local taxing jurisdictions.
             931          (b) If the location of a transaction determined under Subsections (3) through (6) is in a
             932      shared ZIP Code, the location of the transaction is:
             933          (i) if there is only one local taxing jurisdiction that imposes the lowest agreement
             934      combined tax rate for the shared ZIP Code, the local taxing jurisdiction that imposes the lowest
             935      agreement combined tax rate; or
             936          (ii) if two or more local taxing jurisdictions impose the lowest agreement combined tax
             937      rate for the shared ZIP Code, the local taxing jurisdiction that:
             938          (A) imposes the lowest agreement combined tax rate for the shared ZIP Code; and
             939          (B) has located within the local taxing jurisdiction the largest number of street
             940      addresses within the shared ZIP Code.
             941          (c) Notwithstanding any provision under this chapter authorizing or requiring the
             942      imposition of a sales and use tax, for purposes of Subsection (7)(b), a seller shall collect a sales
             943      and use tax imposed under this chapter at the lowest agreement combined tax rate imposed
             944      within the local taxing jurisdiction in which the transaction is located under Subsection (7)(b).
             945          (d) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             946      commission may make rules:
             947          (i) providing for the circumstances under which a seller has exercised due diligence in
             948      determining the nine-digit ZIP Code for an address; or
             949          (ii) notwithstanding Subsection (7)(b), for determining the local taxing jurisdiction
             950      within which a transaction is located if a seller is unable to determine the local taxing
             951      jurisdiction within which the transaction is located under Subsection (7)(b).
             952          (8) The location of a transaction made with a direct payment permit described in
             953      Section 59-12-107.1 is the location where receipt of the tangible personal property, product, or
             954      service by the purchaser occurs.
             955          (9) The location of a purchase of direct mail is the location determined in accordance
             956      with Section 59-12-123 .
             957          (10) (a) Except as provided in Subsection (10)(b), the location of a transaction


             958      determined under Subsections (3) through (6), (8), or (9), is the local taxing jurisdiction within
             959      which:
             960          (i) the nine-digit ZIP Code assigned to the location determined under Subsections (3)
             961      through (6), (8), or (9) is located; or
             962          (ii) the five-digit ZIP Code assigned to the location determined under Subsections (3)
             963      through (6), (8), or (9) is located if:
             964          (A) a nine-digit ZIP Code is not available for the location determined under
             965      Subsections (3) through (6), (8), or (9); or
             966          (B) after exercising due diligence, a seller or certified service provider is unable to
             967      determine a nine-digit ZIP Code for the location determined under Subsections (3) through (6),
             968      (8), or (9).
             969          (b) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             970      commission may make rules for determining the local taxing jurisdiction within which a
             971      transaction is located if a seller or certified service provider is unable to determine the local
             972      taxing jurisdiction within which the transaction is located under Subsection (10)(a).
             973          (11) (a) As used in this Subsection (11), "florist delivery transaction" means a
             974      transaction commenced by a florist that transmits an order:
             975          (i) by:
             976          (A) telegraph;
             977          (B) telephone; or
             978          (C) a means of communication similar to Subsection (11)(a)(i)(A) or (B); and
             979          (ii) for delivery to another place:
             980          (A) in this state; or
             981          (B) outside this state.
             982          (b) Notwithstanding Subsections (3) through (6), beginning on January 1, 2009, and
             983      ending on December 31, 2009, the location of a florist delivery transaction is the business
             984      location of the florist that commences the florist delivery transaction.
             985          (c) In accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking Act, the
             986      commission may by rule:
             987          (i) define:
             988          (A) "business location"; and


             989          (B) "florist";
             990          (ii) define what constitutes a means of communication similar to Subsection
             991      (11)(a)(i)(A) or (B); and
             992          (iii) provide procedures for determining when a transaction is commenced.
             993          (12) (a) Notwithstanding any other provision of this section and except as provided in
             994      Subsection (12)(b), if a purchaser uses computer software and there is not a transfer of a copy
             995      of that software to the purchaser, the location of the transaction is determined in accordance
             996      with Subsections (4) and (5).
             997          (b) If a purchaser uses computer software described in Subsection (12)(a) at more than
             998      one location, the location of the transaction shall be determined in accordance with rules made
             999      by the commission in accordance with Title 63G, Chapter 3, Utah Administrative Rulemaking
             1000      Act.
             1001          (13) (a) A tax collected under this chapter shall be reported to the commission on a
             1002      form that identifies the location of each transaction that occurs during the return filing period.
             1003          (b) The form described in Subsection (13)(a) shall be filed with the commission as
             1004      required under this chapter.
             1005          (14) This section does not apply to:
             1006          (a) amounts charged by a seller for:
             1007          (i) telecommunications service except for a prepaid calling service or a prepaid
             1008      wireless calling service as provided in Subsection (6)(b) or Section 59-12-215 ; or
             1009          (ii) the retail sale or transfer of:
             1010          (A) a motor vehicle other than a motor vehicle that is transportation equipment;
             1011          (B) an aircraft other than an aircraft that is transportation equipment;
             1012          (C) a watercraft;
             1013          (D) a modular home;
             1014          (E) a manufactured home; or
             1015          (F) a mobile home; or
             1016          (iii) except as provided in Section 59-12-214 , the lease or rental of tangible personal
             1017      property other than tangible personal property that is transportation equipment;
             1018          (b) a tax a person pays in accordance with Subsection 59-12-107 (2)[(e)](h); or
             1019          (c) a retail sale of tangible personal property or a product transferred electronically if:


             1020          (i) the seller receives the order for the tangible personal property or product transferred
             1021      electronically in this state;
             1022          (ii) receipt of the tangible personal property or product transferred electronically by the
             1023      purchaser or the purchaser's donee occurs in this state;
             1024          (iii) the location where receipt of the tangible personal property or product transferred
             1025      electronically by the purchaser occurs is determined in accordance with Subsections (3)
             1026      through (5); and
             1027          (iv) at the time the seller receives the order, the record keeping system that the seller
             1028      uses to calculate the proper amount of tax imposed under this chapter captures the location
             1029      where the order is received.
             1030          Section 5. Section 59-12-211.1 is amended to read:
             1031           59-12-211.1. Location of a transaction that is subject to a use tax.
             1032          (1) Subject to Subsection (2), a person that is required by Subsection
             1033      59-12-107 (2)[(e)](h) to pay a use tax on a transaction shall report the location of that
             1034      transaction at the person's location.
             1035          (2) For purposes of Subsection (1), if a person has more than one location in this state,
             1036      the person shall report the location of the transaction at the location at which tangible personal
             1037      property, a product transferred electronically, or a service is received.
             1038          Section 6. Effective date.
             1039          This bill takes effect on July 1, 2013.




Legislative Review Note
    as of 2-21-13 3:05 PM



As required by legislative rules and practice, the Office of Legislative Research and General
Counsel provides the following legislative review note to assist the Legislature in making its
own determination as to the constitutionality of the bill. The note is based on an analysis of
relevant state and federal constitutional law as applied to the bill. The note is not written for
the purpose of influencing whether the bill should become law, but is written to provide
information relevant to legislators' consideration of this bill. The note is not a substitute for the
judgment of the judiciary, which has authority to determine the constitutionality of a law in the
context of a specific case.

This bill creates a rebuttable presumption that certain sellers who do not have a physical


presence in the state, such as a business location in the state, are required to pay or collect and
remit state and local sales and use taxes if those sellers have business relationships with a seller
who does have a physical presence in the state. These relationships include sellers who are
members of the same controlled group of corporations, if the in-state seller performs certain
functions for the out-of-state seller, such as functions related to delivery, installation, assembly,
or maintenance, or conducting another activity that is significantly associated with the out-of-
state seller's ability to establish and maintain a market in the state. The bill creates an additional
rebuttable presumption that a seller is engaged in the business of selling tangible personal
property, a service, or a product transferred electronically in the state, and is therefore required
to pay or collect and remit state and local sales and use taxes, if the seller enters into certain
agreements with a person in the state to refer potential purchasers to the seller, so long as the
seller meets certain sales thresholds within the state.

Because this bill imposes obligations on out-of-state sellers who do not have a physical
presence in Utah, the bill raises issues under the Commerce Clause of the United States
Constitution. The Constitution of the United States grants Congress the authority to "regulate
Commerce with foreign Nations, and among the several States." U.S. Const. art. I, § 8, cl. 3.
Case law has interpreted the Commerce Clause as having a dormant aspect, which "prohibits
certain state actions that interfere with interstate commerce." Quill Corp. v. North Dakots By
and Through Heitkamp,
504 U.S. 298, 309 (1992) (quoting South Carolina State Highway
Dept. v. Barnwell Brothers, Inc.,
303 U.S. 177, 185 (1938)).

In evaluating a state statute under a dormant Commerce Clause challenge, the Supreme Court
of the United States has held that a state may not require an out-of-state seller to collect and
remit a use tax unless the seller has "substantial nexus" with the taxing state. Quill, 504 U.S. at
311. The Court has found that "a vendor whose only contacts with the taxing State are by mail
or common carrier lacks the 'substantial nexus' required by the Commerce Clause." The Quill
case thus established a bright-line rule that some physical presence is required in a state before
the state may impose sales and use tax collection obligations on a seller. Quill, 504 U.S. at 315
("[w]hether or not a State may compel a vendor to collect a sales or use tax may turn on the
presence in the taxing State of a small sales force, plant, or office.") In Scripto v. Carson, the
Supreme Court of the United States found that independent contractors soliciting business
within a state was sufficient presence for the state to impose use tax collection duties. Scripto
v. Carson
, 362 U.S. 207, 211 (1960).

This bill raises the issue of the application of the Quill case and its "substantial nexus" standard
to an area of rapidly changing, evolving technology. Cases are currently moving through the
courts that provide the courts with an opportunity to more clearly define and articulate the legal
contours of what constitutes "substantial nexus" with a taxing state. It is impossible to predict
the outcome of these cases and what changes, if any, they might have on the standards set forth
in Quill. In addition, the Court in Quill noted that this issue is "one that Congress may be
better qualified to resolve" and also "has the ultimate power to resolve." Quill, 504 U.S. at
318. Thus, it is also possible that Congress may act on this interstate commerce issue.

However, because current dormant Commerce Clause case law under Quill requires physical
presence to satisfy "substantial nexus," there is a high probability that if challenged, a court


would hold that the factors that establish nexus under this bill fall short of the physical
presence required under Quill.

Office of Legislative Research and General Counsel


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