BEFORE THE UTAH STATE TAX COMMISSION
Petitioners : FINDINGS OF FACT,
v. : CONCLUSIONS OF LAW
: AND FINAL DECISION
AUDITING DIVISION OF THE :
STATE TAX COMMISSION OF UTAH ) Appeal No. 86-1548
This matter came on for a hearing before the Utah State Tax Commission on XXXXX and was thereafter continued to XXXXX. G. Blaine Davis, Commissioner, and Jerry Larrabee, acting as a hearing officer, heard the matter for the Commission. XXXXX, Attorney at Law, and XXXXX appeared representing the Petitioners. XXXXX, Assistant Attorney General, and XXXXX appeared representing the Respondent. The parties presented testimony and evidence, and based upon that testimony and evidence, the Commission now makes and enters its,
FINDINGS OF FACT
1. The Petitioner, XXXXX, (The Corporation) is a Utah corporation having been incorporated in the State of Utah in XXXXX of XXXXX. The corporation was not authorized to do business in any other state as of the time in question in this proceeding.
2. The Petitioner, XXXXX, was President of XXXXX, and testified that he was out of state with the vehicle in question approximately 80% of the time, and used the vehicle in the State of Utah approximately 20% of the time. The common stock of the corporation is owned 100% by XXXXX, the wife of XXXXX.
3. The Corporation and XXXXX both filed Utah tax returns for XXXXX, and did not file tax returns in any other state.
4. In approximately XXXXX of XXXXX, the Petitioners, XXXXX and XXXXX, purchased a XXXXX for a sum of $$$$$.
5. There were two separate bills of sale entered as evidence in these proceedings, and while they are substantially similar, they are obviously not the same document or copies thereof. The bill of sale introduced in the formal proceeding by the Petitioner was notarized in XXXXX, Utah.
6. The financing of the vehicle was done in Utah by the XXXXX, and the financing documents listed the address of the corporation and XXXXX, President to both be at the same address in XXXXX, Utah, which was the address of XXXXX.
7. The documents were signed by XXXXX, President of XXXXX, and the commercial note was also signed personally by XXXXX. The loan was later extended, and the loan extension agreement was signed by XXXXX without designating himself as President and without specifying that he was acting for the corporation.
8. The corporation filed a corporation franchise tax return with the State of Utah and it did not file an income or franchise tax return in any other state. The depreciation on the vehicle in question was taken on the Utah Corporation Franchise Tax Return, and depreciation on the vehicle was not taken in any other state.
9. The vehicle was registered in the State of Oregon on XXXXX in the names of XXXXX and XXXXX showing an address in XXXXX, Oregon and showing the vehicle to be financed by the XXXXX in XXXXX, Utah.
10. At the time of the acquisition of the vehicle, XXXXX had a Utah Drivers License, but he acquired an Oregon Drivers License on XXXXX, approximately three months after the vehicle was acquired and 2 1/2 months after the vehicle was registered in Oregon.
11. XXXXX is now and was at the time of the acquisition of the vehicle a Utah resident. His wife lives in XXXXX, Utah and his children attend schools in XXXXX, Utah. XXXXX, traveled a great deal and had addresses in other states where he stayed when he was within those states, but he never abandoned his residence in the State of Utah. The only time he has voted in the last decade he voted in Utah. He is also licensed as an insurance agent within the State of Utah, and he testified that the vehicle was used approximately 20% of the time in the State of Utah, and the vehicle has been seen at least three times within the State of Utah by Tax Commission employees.
12. XXXXX, maintained an office within the State of Utah and the vehicle in question was seen by Tax Commission employees parked at the location of that office on two separate occasions.
13. According to information received from the State of Oregon, XXXXX was shown as the registered owner and XXXXX was registered as the registered owners business name.
14. The vehicle was later transferred to XXXXX a Nevada corporation for the sum of $$$$$. The officers of XXXXX, are XXXXX, a resident of XXXXX and XXXXX, a resident of XXXXX, Utah, but who listed his address in XXXXX, Oregon. The common stock of XXXXX is owned 100% by XXXXX, the wife of XXXXX which is the same ownership as XXXXX. XXXXX is licensed to do business within the State of Utah, and the corporation has 50 to 75 employees within the State of Utah which are all handled on an employee lease basis. The Petition for Redetermination states that XXXXX is the successor corporation to XXXXX. The automobile constituted the primary tangible asset of XXXXX and that has been transferred to XXXXX.
XXXXX engages in substantially the same type of business as XXXXX, and has taken over any business and received the few other assets held by XXXXX. There was no testimony or evidence to indicate that XXXXX complied with the bulk sales act or gave notice to any creditors of the transfer of assets at the time XXXXX was formed.
15. XXXXX testified that the vehicle was delivered to him in Oregon, but he doesn't remember where the money transferred and he doesn't remember where the bill of sale was signed. The vehicle was financed in Utah, so it is presumed that the money transferred in Utah and the bill of sale was notarized in Utah, so it is presumed that the bill of sale was signed and executed in Utah.
16. In closing arguments, XXXXX observed that when XXXXX was testifying, he was evasive when it suited him and very precise at other times when it served his interest. The Commission concurs with that observation and observes that it had substantial reservations about the veracity of the testimony of XXXXX. The self-serving portions of his testimony were remembered with great clarity, but the portions which would be against his interests were very hazy and foggy or could not be recollected at all. This impression was substantiated by the introduction of one bill of sale at the informal hearing, but a different bill of sale being presented at the formal hearing. The bills of sale were purportedly signed by the seller of the vehicle, who was the son of one of the officers of XXXXX.
17. The Petitioner, XXXXX, has dealt with the vehicle of XXXXX, and XXXXX, as though it was owned by him and as though he had no responsibility to any other persons except himself and his wife. There was no evidence introduced of any board of directors meeting being held, there were no minutes of any shareholders meetings ever being held, and there was no evidence that actions of either corporation were approved or disapproved by any board of directors or shareholders meeting or that approval was required from any person other than XXXXX. There is no evidence that either corporation was acting like a corporation, nor were any of these transactions properly approved in a corporate manner. The Commission therefore finds that the alter ego theory applies in this proceeding and that XXXXX is responsible individually for actions or inactions of XXXXX.
Based upon the foregoing Findings of Fact, the Commission now makes and enters its,
CONCLUSIONS OF LAW
1. Pursuant to59-12-104 (9) Utah Code Ann. 1953, as amended, the only vehicles which are exempt from the payment of sales tax are those where sales are made to bonafide nonresidents of the State of Utah and are not thereafter registered or used in the State of Utah except as is necessary to transport them to the borders of the State of Utah. The vehicle in question was purchased within the State of Utah by the Petitioner, XXXXX who was a Utah resident, and/or by the Petitioner XXXXX which was doing business in the State of Utah, and was thereafter used within the State of Utah.
2. This transaction was subject to sales tax within the State of Utah.
3. The Petitioners had the burden of proving that sales tax was improperly applied to this transaction by the Auditing Division, and the Petitioners have failed to sustain this burden of proof.
4. The Respondent had the burden of proving that the 100% penalty imposed by59-1-302 (3) should be applied to this transaction. The Commission concludes that the Petitioner did attempt to evade or defeat the payment of the sales tax, and that therefore the 100% penalty should apply. The Respondent did sustain that burden of proof.
5. Utah Code Ann. Section 59-1-302 (8)(c) Utah Code Ann. 1953, as amended specifically provides that, "the Commission or Court need not find a bad motive or specific intent to defraud the government or deprive it of revenue to establish willfulness under this section."
6. When officers and directors of corporations deal with the assets of the corporation as though they did not need approval from any other individual, board, or shareholders they become personally responsible for the actions or inactions of that corporation under the alter ego theory.
7. The Petitioner, XXXXX, is also personally responsible for the tax, penalty and interest in this proceeding because of the provisions of Section 70A-3-403, Utah Code Annotated 1953, as amended.
Based upon the foregoing Findings of Fact and Conclusions of Law, the Commission now makes and enters its,
DECISION AND ORDER
It is the decision and order of the Commission that the vehicle in question was purchased by the corporation and XXXXX, and that the corporation and XXXXX are both jointly and severally liable and responsible for sales tax on the purchase price of the vehicle of $$$$$, a 100% penalty and the interest thereon from XXXXX until paid.
DATED this 17 day of July, 1989.
BY ORDER OF THE UTAH STATE TAX COMMISSION.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis