TN 13 (02-12)
RS 02101.425 Classes of Purchasers
A wholesaler buys merchandise in large quantities and usually sells in small quantities to jobbers or retail dealers, but not to the ultimate consumer. The wholesaler does not process the merchandise in any way that would cause it to lose its identity.
A retailer buys merchandise in small quantities, and then sells it to the ultimate consumer in smaller quantities. Retail establishments may perform service functions or processing or manufacturing operations for the items they sell without losing their character as retail establishments. For example, a store that sells materials for draperies and slipcovers, and makes the draperies and slipcovers for the consumer is a retail establishment and not a manufacturer. A neighborhood bakery is essentially a retail store even though it changes the form of the raw material to the final prepared material.
A contractor includes service organizations such as window-washing, wall-cleaning, construction, and other services.
4. Hotels, restaurants, or other similar establishments
The phrase “other similar establishments” refers solely to establishments similar to hotels and restaurants. It is limited to establishments whose primary function is to furnish food or lodging.
B. Introduction to classes of purchasers
The salesperson must sell to the classes of purchasers such as wholesalers, retailers, contractors, hotel operators, restaurants, or other similar establishments. He or she may sell to others, provided such sales are incidental. Consider the percentage of a salesperson's total work time spent to solicit orders from the specified classes of purchasers. Also, consider other factors such as income rates, and number of sales. If the sales to excluded purchasers are incidental, all of the salesperson's services for his or her principal are within the occupational category.
C. Purchasers not included for traveling or city salespeople
Manufacturers, schools, hospitals, churches, municipalities, and State and federal governments are not within the included classes of purchasers. A manufacturer produces articles for use from raw or prepared materials by providing new forms, qualities and properties, or a combination of these items.
D. Purchasers composed of several business units
Sales made to an organization that is not within the included classes of purchasers may meet the requirements regarding “classes of purchasers” if a unit of the organization carries on a separate and clearly identifiable business that is included in the classes of purchasers described in RS 02101.425 and the Internal Revenue Code Section 3121 (d)(3)(D) . We deem a salesperson who solicits orders from the organization for merchandise for resale by or for use in business operations in such unit to have met the requirement for “classes of purchasers”.
For example, sales made to an unincorporated college bookstore that the college owns and operates are sales made to a purchaser included in the statutory definition of a traveling or city salesperson.