BEFORE THE STATE TAX COMMISSION OF UTAH
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.
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).
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.
R. H. Hansen Roger O. Tew
Joe B. Pacheco G. Blaine Davis