BEFORE THE STATE TAX
COMMISSION OF UTAH
_____________________________________
XXXXX
Petitioner, :
v. : INFORMAL DECISION
AUDITING
DIVISION OF THE : Appeal Nos. 87-1095,
UTAH STATE TAX COMMISSION, : 87-1096,
87-1097,
Respondent. : and 87-2672
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission in an informal hearing held
XXXXX. The hearing was held in response
to a Petition for Redetermination submitted by Petitioner after receiving a
notice of deficiency of sales tax on four vehicles purchased in the state of
Utah. James E. Harward, Hearing
Officer, heard the matter for and in behalf of the Utah State Tax
Commission. XXXXX, Attorney at Law,
represented Petitioner. XXXXX,
Supervising Auditor, Auditing Division, represented Respondent.
Petitioner
was assessed sales tax on four vehicles purchased in Utah between XXXXX. For each vehicle, Petitioner had executed a
nonresident exemption form asserting that he was a XXXXX resident and that the
vehicles would "not be used on the highways of Utah. . . except as
necessary to transport [them] to the borders of the state. . . ." Tax Commission exemption form TC-593.
Petitioner
asserts that, according to Utah Code Ann. §59-12-104(9), he could only be
liable for sales tax on the purchased vehicles if he were a resident of the
state of Utah and if the subject vehicles were used more than the limited use
authorized by law. Petitioner cites
Utah Code Ann. §20-2-14 (which defines residency for voting purposes) and case
laws from other jurisdictions defining "resident" as a person who has
bodily presence in a place, plus the intention to remain permanently. Petitioner maintains that, based on this
authority, he cannot be considered a Utah resident for tax purposes since he
maintains, "and has maintained for a period of more than ten years, a
permanent residence, a place of business, voting records, address for state and
federal income tax purposes, motor vehicle operator's license, and registration
in the state of XXXXX." Petitioner
admits to visiting the state of Utah for short periods of time, primarily for
recreational purposes, but asserts that the short visits do not disqualify him
from exempt, nonresident status since he has never intended to maintain or
establish a permanent residency within the state. See Utah Admin. R. R873-O1V.
With
regards to each vehicle, Petitioner asserts that the XXXXX was never in the
state of Utah after purchase and that the vehicle was subsequently registered,
licensed, and taxed in XXXXX; and that the XXXXX and the XXXXX were driven to
and licensed and registered in XXXXX subsequent to purchase. Petitioner admits that the XXXXX have been
used in Utah on an infrequent basis.
The XXXXX, Petitioner asserts, was involved in an automobile accident
shortly after purchase. The vehicle
remained in the state until repaired and was subsequently transported to and
licensed and registered in the state of XXXXX.
Petitioner admits that the vehicle was driven in Utah before the
accident and after it was repaired before being transferred to XXXXX. Petitioner argues that the use of the XXXXX
was not more than the "infrequent occasional. . . use" allowed by
law. See Tax Commission Bulletin 10-27 (issued
to clarify Utah Code Ann. §59-12-104(9)).
Respondent
presented evidence consisting of several deeds issued in Petitioner's name,
evidencing ownership of several pieces of property. Respondent asserts that the plain meaning of Utah Code Ann.
§59-12-104(9) (sales tax exemption for nonresidents) as defined by Utah Admin.
R873-O1V (defining "resident" for motor vehicle registration
purposes) establishes Petitioner's liability for sales tax on the subject
vehicles. Respondent presented
substantial evidence--consisting of vehicle sighting reports, photos, and repair
orders issued for three of the vehicles--that suggest that the vehicles were
present longer and used more frequently in the state than Petitioner indicates.
Respondent also presented evidence that the XXXXX plates on two of the vehicles
were either invalid or not assigned to those particular vehicles. Respondent claims that this supports the
assertion that the penalties for fraud with intent to evade are in order since
it brings into question the validity of Petitioner's claim that the vehicles
were properly registered in XXXXX.
FINDINGS
Residency
Utah
Code Ann. §59-12-104(9) provides that "sales of vehicles of a type
required to be registered. . . [in] this state which are made to bona fide
nonresidents of this state and are not thereafter registered or used in this
state. . ." are exempt from sales and use tax. Petitioner's liability for sales tax is determined by whether he
can be considered a resident of the state for motor vehicle registration
purposes, since the sales tax exemption does not apply if the vehicle is
required to be registered in the state, and on whether the vehicles were used
more than the "infrequent occasional" use allowed by law. Tax
Commission Bulletin 10-27 (issued to clarify Utah Code Ann. §59-12-104(9)).
For
purposes of motor vehicle registration, "resident" is defined as
"any person--except tourists temporarily within this state, or a student.
. .--who owns, leases, or rents a residence. . . within this state. . . ."
Utah Admin. Rule R873-O1V. Thus, any
person who owns a residence within this state, except a tourist temporarily in
the state, must register any vehicle to be operated in the state. The Tax Commission has not specifically
defined the term "residence" for motor vehicle registration purposes,
but has adopted a general definition as "presence at some place of abode.
. . for the purposes to remain for. . . [an] undetermined period, not
infrequently, but not necessarily combined with design to stay
permanently." [emphasis added] Black's Law Dictionary 1176 (fifth addition
1979). This definition draws the
distinction between "residence," which does not require "design
to stay permanently," and "domicile," which does require an
intent to make a place a fixed and permanent home. Thus, while Petitioner may, by virtue of his voting record and
business activities, etc., be domiciled in XXXXX; he may have residences in and
be a resident of both XXXXX. Drawing
this distinction between "residence" and "domicile" is
consistent with the statutory definition given for "resident
individual" for income tax purposes in the Utah Tax Code. Utah Code Ann. §59-10-103(h)(ii) defines
"resident individual" as either an individual who is domiciled in
this state, or an individual who is "not domiciled n this state but
maintains a permanent place of abode in this state. . . ." [emphasis
added] (Note: the time requirement of "an aggregate of 183 days" is
specific to income tax requirements.)
Respondent
presented sufficient evidence to establish that Petitioner's relationship with
the state was ongoing and not infrequent and therefore Petitioner cannot be
considered a "tourist temporarily within the state," and cannot claim
an exemption on that basis.
Based
on the foregoing, the Tax Commission finds that Petitioner is a resident of the
state for motor vehicle registration purposes and is therefore liable for sales
tax on any vehicle operated on the highways of Utah more than the occasional or
infrequent use allowed by law. See Utah
Code Ann. §59-12-104(9).
Vehicle Use
Respondent
presented ample evidence regarding the XXXXX to support Respondent's contention
that the vehicles were used more than occasionally within the state. However, Respondent did not produce such
evidence in regards to the XXXXX.
Therefore, the Commission finds the Petitioner liable for sales tax on
the XXXXX. The Commission finds no
liability for sales tax on the XXXXX Penalties and Interest.
Utah
Code Ann. §59-1-401(3) stipulates that if an underpayment is "due to fraud
with intent to evade the tax, the penalty is the greater of $500 per period or
100 percent of the underpayment."
Respondent had the burden of proof to show that Petitioner intentionally
evaded the subject tax. Respondent
failed to meet that burden, and therefore, the 100 percent fraud penalty does
not apply. Utah Code Ann. §59-1-401(3)
also provides that if the underpayment is due to negligence, the penalty is ten
percent of the tax due; but if the underpayment is due to an intentional
disregard for law or rule, the penalty is 15 percent of the tax. Petitioner's tagging of two other vehicles
with invalid or incorrect plates goes beyond simple negligence. Absent any contrary evidence, the Commission
finds that those actions constituted an intentional disregard of the law, which
opens the Petitioner to liability for a 15 percent penalty.
Because
Petitioner has had use of the money which should rightfully have been given
over to the Commission at the time of purchase, all interest assessments are
affirmed on the XXXXX.
DECISION AND ORDER
Based
on the foregoing, it is the decision and order of the Utah State Tax Commission
that the Notices of Deficiency issued for sales tax on the XXXXX be affirmed
with the following changes. The
penalties for underpayment of tax on the XXXXX--Appeal Nos. 87-1095, 1096, and
1097--shall be reduced from 100 percent of the tax due to 15 percent of the tax
due. All tax and penalty and interest
assessments on the XXXXX, Appeal No. 87-2672, are waived.
DATED
this 4 day of July, 1988.
BY ORDER OF THE STATE TAX COMMISSION OF UTAH.
ABSENT
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner