Sales Tax

Signed 8/12/02







Petitioner, ) Appeal No. 01-1271


v. )




COMMISSION, ) Tax Year(s): 1996 - 2000


Respondent. ) Judge: Davis




G. Blaine Davis, Administrative Law Judge



For Respondent: Ms. Susan Barnum, Assistant Attorney General

Ms. Julie Halvorsen, from the Taxpayer Services Division

Ms. Susan Hoggan, from the Taxpayer Services Division



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.


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."



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.


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




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