01-1271
Sales Tax
Signed 8/12/02
BEFORE THE UTAH STATE TAX
COMMISSION
____________________________________
PETITIONER, ) ORDER
)
Petitioner, ) Appeal No. 01-1271
)
v. )
)
TAXPAYER SERVICES
DIVISION ) Tax Type:
Sales Tax
OF THE UTAH STATE TAX )
COMMISSION, ) Tax Year(s): 1996 - 2000
)
Respondent. ) Judge: Davis
_____________________________________
Presiding:
G. Blaine Davis,
Administrative Law Judge
Appearances:
For Petitioner: ATTORNEY FOR PETITIONER
For Respondent: Ms. Susan Barnum, Assistant Attorney
General
Ms. Julie Halvorsen, from
the Taxpayer Services Division
Ms. Susan Hoggan, from the
Taxpayer Services Division
STATEMENT
OF THE CASE
This matter came before
the Utah State Tax Commission for an Initial Hearing pursuant to the provisions
of Utah Code Ann. '59-1-502.5 on December
11, 2001.
The period at issue is
April 1, 1996 through March 31, 2000.
Petitioner had a
business relationship with COMPANY A. ("A").
COMPANY A is engaged in
the business of selling vehicles to the general public. Petitioner financed some of those sales of
automobiles by making loans to the purchasers of the automobiles. In those transactions, “COMPANY A” collected and remitted the sales
tax pursuant to Utah Code Ann. §59-12-107.
Some of the purchasers
of those vehicles did not complete the payments, and the automobiles securing
most of those loans were repossessed by Petitioner.
On January 30, 2001,
Petitioner submitted to Respondent a claim for refund of sales tax for various
repossessed vehicles originally sold by COMPANY A through loans financed by
Petitioner. On July 18, 2001,
Respondent issued a Statutory Notice denying the refund because the dealer that
sold the vehicles is still in business.
In each of the transactions
at issue, “COMPANY A” collected the sales tax from the purchasers of the
vehicles, and remitted that sales tax to the Tax Commission. Petitioner was a third party in each of
those transactions, and did not collect or remit to the Tax Commission the sales
tax from the transaction.
There was no arrangement
or agreement between Petitioner and COMPANY A for Petitioner to claim the sales
tax credit on any repossessions made under the terms of a conditional sales
contract.
“COMPANY A” is still in
business.
APPLICABLE
LAW
Utah Code Ann.
§59-12-107(7) provides as follows:
"Credit is allowed for prepaid taxes and for taxes paid
on that portion of an account determined to be worthless and actually charged
off for income tax purposes or on the portion of the purchase price remaining
unpaid at the time of a repossession made under the terms of a conditional
sales contract."
Utah
Administrative Code Rule R865-19S-20.C.6 provides as follows:
"Credit for tax on repossessions is allowed only to the
selling dealer or vendor.
a) This does not preclude arrangements between
the dealer or vendor and third party financial institutions wherein sales tax
credits for repossessions by financial institutions may be taken by the dealer
or vendor who will in turn reimburse the financial institution.
b) In
the event the applicable vehicle dealer is no longer in business, and there are
no outstanding delinquent taxes, the third party financial institution may
apply directly to the Tax Commission for a refund of the tax in the amount that
would have been credited to the dealer."
DISCUSSION
In
each of the transactions involved in this proceeding, Petitioner is a third
party financial institution that made a loan to various purchasers of
automobiles from COMPANY A. Petitioner
did not collect the tax or remit the tax to the Tax Commission.
The
issue in this proceeding is not whether someone may be entitled to a refund of
the sales taxes on the repossessed automobiles. Instead, the issue is whether this third party financial institution,
COMPANY B, is entitled to a refund, even though COMPANY A., is still in
business, and is still operating.
Petitioner
acknowledges that Rule R865-19S-20.C.6 would sustain the actions taken by
Respondent in denying the refund claim to Petitioner. The position of Petitioner is that the rule is not consistent
with the statute, UCA §59-12-107(7).
Petitioner claims that it was the ultimate taxpayer and is therefore
entitled to a sales tax refund because the proceeds of the loan were used to
pay a part of the sales tax.
The
Commission does not agree with the interpretation of Petitioner. The statute and rule are designed to refund
any sales taxes or repossessions to the party that collected and remitted those
taxes to the Tax Commission, and in turn, the customer who paid those sales
taxes to the vendor may look to the vendor for any appropriate relief for sales
tax refunds. There is a provision in
the rule which will allow a refund to a financial institution if the dealer is
no longer in business, but where the dealer is in business, as here, the refund
must go to the dealer and not to the financial institution.
There
is a way that Petitioner could have protected itself and could have established
the right to receive any refunds on repossessions from the Tax Commission by
having an agreement with the automobile dealer, but it did not do so.
Petitioner
further claims that it has been denied its rights under both the State and
Federal Constitution by the Division denying it the refund. The Commission does not agree with that
interpretation.
DECISION
AND ORDER
Based upon the
foregoing, the Commission determines that Rule R865-19S-20 is a valid rule
which is not inconsistent with Utah Code Ann. §59-12-107. Further, the Rule clearly denies to Petitioner
the right to recover the refunds of sales taxes requested in its petition. Accordingly, the request for refund of
Petitioner is hereby denied.
This decision does not
limit a party's right to a Formal Hearing.
However, this Decision and Order will become the Final Decision and
Order of the Commission unless any party to this case files a written request
within thirty (30) days of the date of this decision to proceed to a Formal
Hearing. Such a request shall be mailed
to the address listed below and must include the Petitioner's name, address,
and appeal number:
Utah State Tax
Commission
Appeals
Division
210
North 1950 West
Salt
Lake City, Utah 84134
Failure to request a
Formal Hearing will preclude any further appeal rights in this matter.
DATED this __________
day of _______________________, 2002.
____________________________________
G. Blaine Davis
Administrative Law Judge
BY ORDER OF THE UTAH STATE TAX
COMMISSION.
The Commission has
reviewed this case and the undersigned concur in this decision.
DATED this _________ day
of ________________________, 2002.
Pam Hendrickson R.
Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc
B. Johnson
Commissioner Commissioner