87-0546 - Sales





            Petitioner,                                                         )

v.                                                                                 )           INFORMAL DECISION

AUDITING DIVISION OF THE STATE                    )           Appeal No. 87-0546

TAX COMMISSION OF UTAH,                               )

            Respondent.                                                     )



            An Informal Hearing was held on XXXXX.  James E. Harward, Hearing Officer, heard the matter for the Utah State Tax Commission.  XXXXX, attorney, represented Petitioner.  XXXXX, Assistant Attorney General, and XXXXX and XXXXX represented Respondent.  Petitioner sold a XXXXX automobile to XXXXX in XXXXX.  XXXXX signed a nonresident affidavit, Petitioner did not collect sales tax from XXXXX, and Respondent subsequently assessed a sales tax and a 100% fraud penalty against Petitioner.  Because Respondent had the burden of proving fraud, Respondent proceeded first with its argument.  XXXXX testified that the dealer file shows an automobile agreement with XXXXX address and Utah driver's license Nos.  It is marked through with the word void in another automobile agreement with the XXXXX addresses also in the dealer file.  XXXXX testified that the fact that XXXXX had a Utah address would have put the dealer on notice that the nonresident affidavit may not be correct.  XXXXX argued that filling out a new automobile agreement form was an overt act to attempt to legitimize the nonresident affidavit.  Petitioner argued that leaving the first automobile agreement in the file with the XXXXX address shows that Petitioner had no intent to defraud the state of sales tax.  Petitioner indicated that the people associated with the first contract with the XXXXX address are no longer available and that no information has been presented regarding how the contractors prepare it.


            Tax Commission Rule R873-01V designates as a resident "[a]ny person, except a tourist temporarily within the state, or a student covered under Rule R873-04V, who owns, leases, or rents a residence . . . ."  Therefore, XXXXX are residents within the meaning of Tax Commission Rule R873-01V, because they are not tourists temporarily within this state or students covered under another rule.  XXXXX submitted an affidavit in which he stated that he is a resident of and domiciled in the city of XXXXX, and is employed by his family's nursery in XXXXX, and he owns a second home in XXXXX, which he uses while on business or for vacation purposes. Because XXXXX use the XXXXX home for business and for vacation purposes, they could not be considered tourists.  Therefore, the Utah State Tax Commission finds that XXXXX are Utah residents within the meaning of Tax Commission Rule R873-01V which requires any person qualifying as a resident who operates a vehicle in Utah to register the vehicle in Utah.  Any person who qualifies as a resident under this rule and is required to register a vehicle in Utah under this rule is also required to pay sales tax on the in state purchase of the vehicle.  Although the first automobile agreement form located in the dealer's file with the XXXXX address should have put Petitioner on notice that XXXXX may have been Utah residents, the Commission finds the Petitioner acted negligently but not fraudulently in accepting the nonresident affidavit filled out by XXXXX.  The Commission finds that the XXXXX home is indeed their second home or vacation home and that Petitioner in good faith believed the XXXXX to be residents of XXXXX since they reside and work there.  However, Petitioner failed to understand that if purchasers are Utah residents pursuant to Tax Commission Rule R873-01V, dealers are to collect sales tax from the purchaser.


            Based on the foregoing, it is the Decision and Order of the Utah State Tax Commission to uphold the tax and a 10% negligence penalty.  Interest is ordered to be adjusted if necessary to reflect the reduced penalty amount. Respondent is ordered to recompute the tax, penalty and interest amount and to refund any balance to Petitioners.

            DATED this 26 day of October, 1987.


R. H. Hansen                                                                Roger O. Tew

Chairman                                                                      Commissioner

Joe B. Pacheco                                                            G. Blaine Davis

Commissioner   Commissioner