Utah Court of Appeals

When does sporadic business activity trigger Utah sales tax collection duties? Key, Inc. v. Utah State Tax Comm. Explained

1997 UT App
No. 960793-CA
March 13, 1997
Affirmed

Summary

B.L. Key, Inc., an Oklahoma corporation, manufactured concrete weights and coatings for a Utah pipeline project over eight months, sending supervisors to Utah on approximately eight trips to oversee production at four locations throughout the state. The Utah State Tax Commission assessed the company over $68,000 in unpaid sales and use taxes, determining that Key was required to collect and remit such taxes under Utah Code Ann. § 59-12-107(1)(a)(iv) and (v).

Analysis

In Key, Inc. v. Utah State Tax Commission, the Utah Court of Appeals addressed a critical question for out-of-state businesses: when do intermittent business activities in Utah trigger the obligation to collect and remit sales and use taxes?

Background and Facts

B.L. Key, Inc., an Oklahoma corporation, entered into agreements to manufacture concrete weights and coatings for a Utah natural gas pipeline project. Over approximately eight months, Key sent three supervisors on about eight trips to four Utah locations. The supervisors hired local workers, paid withholding taxes and workers’ compensation, and oversaw production worth over one million dollars. The Utah State Tax Commission assessed Key $68,873.22 in unpaid sales and use taxes, arguing that Key was required to collect and remit these taxes under Utah Code Ann. § 59-12-107(1)(a).

Key Legal Issues

The central issue was whether Key regularly engaged in the delivery or servicing of property in Utah under sections 59-12-107(1)(a)(iv) and (v), despite the intermittent and sporadic nature of its activities. Key argued that “regularly” requires predictable or uniform intervals, while the Commission contended it refers to repetition of services within the state.

Court’s Analysis and Holding

The court found the term “regularly” ambiguous and turned to legislative intent. The statute was adopted from the Multistate Tax Commission’s Sales and Use Tax Jurisdiction Standard, created after National Bellas Hess to address physical presence requirements for tax collection duties. The legislative history revealed an intent to capture vendors conducting considerable business in Utah despite lacking permanent physical presence. The court held that “regularly engages” refers to repetition of delivery or servicing activities, including the extent of in-state business, rather than fixed scheduling.

Practice Implications

This decision significantly broadens Utah’s reach over out-of-state vendors. Businesses cannot avoid tax collection obligations merely by maintaining irregular schedules. Courts will examine the totality of business activities, duration of presence, scope of operations, and economic impact within Utah. Companies conducting project-based work or seasonal activities in Utah should carefully evaluate their potential tax obligations.

Original Opinion

Link to Original Case

Case Details

Case Name

Key, Inc. v. Utah State Tax Comm.

Citation

1997 UT App

Court

Utah Court of Appeals

Case Number

No. 960793-CA

Date Decided

March 13, 1997

Outcome

Affirmed

Holding

A vendor ‘regularly engages’ in delivery or servicing of property in Utah under section 59-12-107(1)(a)(iv) and (v) when it repeatedly conducts business activities in the state over time, even if those activities occur sporadically rather than at predictable intervals.

Standard of Review

Correctness for conclusions of law

Practice Tip

When advising out-of-state clients on Utah sales tax obligations, consider the totality of their business activities in Utah over time rather than just the regularity of their schedule, as intermittent but repeated presence can trigger collection duties.

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