BEFORE THE UTAH STATE TAX
COMMISSION
_____________________________________
XXXXX
:
Petitioner, :
: FINDINGS
OF FACT,
v. : CONCLUSIONS OF LAW
: AND FINAL
DECISION
AUDITING
DIVISION OF THE :
UTAH STATE TAX COMMISSION, : Appeal No. 88-2490
: Account
No. XXXXX
Respondent. :
_____________________________________
STATEMENT OF CASE
This
matter came before the Utah State Tax Commission pursuant to the Administrative
Procedures Act for a formal hearing on XXXXX before Joseph G. Linford,
Presiding Officer. Petitioner was represented
by XXXXX, Attorney at Law, XXXXX, and XXXXX.
Respondent was represented by XXXXX, Assistant Attorney General, and
XXXXX, XXXXX and XXXXX of the Auditing Division of the Utah State Tax
Commission.
After
reviewing the evidence and arguments of the parties in the record and the
recommendation of the presiding officer, the Tax Commission makes its:
FINDINGS OF FACT
1. The tax in question is sales and use tax.
2. The period in question is XXXXX through
XXXXX.
3. The only issue before the Commission in this
case involves XXXXX sales made by Petitioner during the period in question
which Petitioner claimed were exempt from taxation. The persons or entities to whom these disallowed sales were made
are as follows: XXXXX.
4. Petitioner now concedes that under the
statutes and regulations it is unquestioned that the following sales were not
exempt: XXXXX.
5. There were no nonresident affidavits in
Petitioner's file for the following contested accounts: XXXXX.
6. On the XXXXX account, XXXXX was being
treated at the XXXXX at the time she purchased a vehicle from Petitioner. She stated on the affidavit that she was a
nonresident of Utah and the car in question was subsequently registered in
XXXXX. The vehicle is now being used by
her in Utah, and she is now living in the state although it is unclear as to
when she actually made her permanent residence in Utah. On the purchase agreement and credit
application in Petitioner's files, an XXXXX address is indicated for
XXXXX. It is also indicated that her
husband is a resident of Utah. These
facts, combined with the fact that it was quite clear that XXXXX would use the
vehicle in Utah because of the necessity of her remaining for some time in the
state for her medical treatment, indicates that the sale of the vehicle in
question was not tax exempt.
7. On the XXXXX account, the affidavit states
that XXXXX is employed by the XXXXX in Utah although it also states that his
residence is in Florida. The vehicle in
question was registered in Florida. Since
XXXXX was employed in the state of Utah and it is clear that the vehicle in
question would be used in Utah, this is subject to sales tax in this state
because XXXXX is considered a resident under the provisions of Tax Commission
Rule R873-22l-M(6)(4).
8. Regarding XXXXX account, the subject vehicle
was purchased by XXXXX, an officer or agent of the company known as XXXXX. The affidavit states that XXXXX is a
resident of XXXXX and the vehicle in question is also registered in that
state. Apparently two purchase
agreements were filled out in this account for the same vehicle, one of them
hand written and without a date which indicates a XXXXX, Utah address. The other purchase agreement is typewritten
and is dated XXXXX and indicates a Georgia address. XXXXX also testified that he has personal knowledge that at the
time the subject vehicle was purchased, XXXXX was a resident of XXXXX,
Utah. Although XXXXX apparently indicated
to Petitioner that the vehicle would not be used inside the state of Utah, the
conflicting evidence as to this fact indicates that there is a basis for doubt
on this point.
9. Regarding the XXXXX account, the affidavit
states that XXXXX are residents of Oregon and the vehicle was licensed in that
state. There is no indication that XXXXX is employed in Utah. The purchase agreement states an Oregon
address. However, the credit
application indicates an XXXXX, Utah address and states that XXXXX had lived at
that address for the past one year and eight months. Although there is no date on the copy of the credit application
given as evidence in this case, the credit application is to obtain credit for
the purchase of the vehicle in question; therefore, the XXXXX time period would
include the time up to the day credit was applied for to purchase the subject
vehicle on XXXXX. An XXXXX address is
also listed on the offer to purchase form.
Here again there is conflicting evidence as to actual residence of the
XXXXX, which indicates that this transaction was not exempt.
10. For the XXXXX account, the vehicle in
question was purchased jointly by XXXXX.
The affidavit states that XXXXX is employed in Idaho but that XXXXX is
employed at XXXXX in Utah. The vehicle
in question was registered in Idaho.
XXXXX does not use the vehicle to travel to her work, she uses a van
pool for that purpose. All of the
documents in the record on this account support the above facts. Every indication is that the subject vehicle
has not ever been used in Utah except to transport it to the state's
border. Simply because XXXXX is
employed within Utah does not make the transaction in question taxable. Mere employment within the state, without
more, is not sufficient to subject a transaction to the sales tax. Administrative
Rule R873-22l-M(6)(4) does state that a person employed in Utah is considered a
resident for purposes of vehicle registration.
However, in view of the sometimes nonsensical results of applying this
rule strictly without regard to the reasons behind it, as this case
illustrates, it may be necessary for the Tax Commission to revise this
rule. This rule is based on the
assumption that if a person works in Utah, then they also drive their car to
work in Utah. In this case, where there
is no indication of any other connection between the XXXXX and Utah, and where
the vehicle is not used in the state, this rule alone will not render the
transaction taxable.
11. On the XXXXX account, the affidavit states
that XXXXX was employed by XXXXX in Wyoming.
His residence was listed on the affidavit as being in Wyoming, and the
affidavit states that he had not been a Utah resident for at least the past 60
days although his previous residence was in Utah. The vehicle in question was registered in Wyoming. However, the purchase agreement, the credit
report, and the offer to purchase all indicate Utah addresses and a Utah
residential telephone number. In cases
such as this one, Petitioner offers three arguments. First, Petitioner asserts that Utah addresses listed on such
documents as credit reports and purchased agreements are merely "points of
reference" addresses and not actually the residences of the people
involved. Secondly, Petitioner
speculates that the addresses listed on credit applications are often there
merely for purposes of obtaining credit in that Petitioner believes that many
Utah lending institutions require Utah addresses for the people to whom they
loan. As to these first two arguments
Petitioner has offered speculation only and has not offered any credible
evidence in support of them. Further,
these arguments are not sufficient to overcome a presumption that a credit
application and credit report are filed with the person's correct resident
address. When a person lists Utah on
any of the documents provided to the dealer, or the dealer has any other reason
to question the nonresident representation of the purchaser, that dealer is
placed on notice that the person probably does not qualify for a nonresident
tax-free purchase of a motor vehicle. The
burden of proof is then shifted to the dealer to prove that the purchaser is
not a resident of Utah. If convincing
evidence is not then provided that the purchaser is not a resident of Utah, the
sales tax must be collected by the dealer and remitted to the State Tax
Commission. Petitioner's third argument is that Petitioner is entitled to rely
upon the statements of purchasers in the nonresident affidavits as to their
actual places of residence and use of the subject vehicles even in the face of
the other documents or indications which may tend to show otherwise. Petitioner asserts that this is particularly
so since many of those documents such as financing documents frequently do not
even come into Petitioner's possession until after all of the paperwork is
completed. This argument is rejected. The vehicles are not registered until all of
the paperwork is complete, and if any paperwork comes into the hands of the
dealer prior to registration of the vehicle, it is the burden of the
Petitioner, as an agent for the state in collecting the tax to do all that is
reasonably necessary to ensure that their sales are tax exempt before according
those sales that status. If there are
indications at any time prior to the registration of the vehicle that the sale
may not be tax exempt, it is Petitioner's duty to inquire into the matter until
they are reasonably certain that the sale is or is not exempt. Any such determination should be
documented. Even when the Petitioner may
not receive certain information until after the paperwork is completed, it is
nevertheless a simple matter for facts to be established and documented by the
dealer through adequate record keeping. Therefore, as to the XXXXX account, the
conflicting evidence in the record again raises a question as to the exempt
status of the transaction and Petitioner has not proven to the satisfaction of
the Commission that the transaction was exempt.
12. On the XXXXX account, in addition to there
being no affidavit in the file, the bank credit application indicates a Utah
address although the purchase agreement indicates an Idaho address. Here again, the conflicting evidence
indicates that Petitioner has not sufficiently proven the exempt status of the
transaction in question.
13. On the XXXXX account, there is also no
affidavit in the file, and the credit application states that XXXXX is employed
by the XXXXX and gives a Utah phone number.
The offer to purchase document also indicates a mailing address at XXXXX
in Utah and a Utah telephone number.
The purchase agreement, though it indicates an Oregon address, does give
the Utah phone number found on the other documents. Here again, the fact that Petitioner is employed within the state
and also the conflicting evidence as to his actual residence would indicate
that the transaction in question is not exempt.
14. On the XXXXX account, there is no affidavit
in the file and the offer to purchase document shows a XXXXX, Utah address and
a Utah telephone number. This indicates
that the transaction was not sales tax exempt.
15. In all of those transactions where no
affidavit was filed, it is evident on that fact alone that Petitioner has not
met its burden of proof as to the exempt status of the transactions in
question. Such affidavits are required
in any case to show that a transaction is exempt. Petitioner asserts that it attempted to obtain copies of such
affidavits from the Utah State Tax Commission but was not allowed to obtain
them and that these documents would show the exempt status of these sales. It has been a long standing policy of the
Auditing Division that copies of such affidavits will not be supplied to those
responsible for collecting sales tax.
This is not a matter of withholding information but more a matter of
necessity in requiring dealers to maintain their own accurate records. If the Tax Commission were to routinely
supply copies of the affidavits to any business that requested them, this would
be a significant burden on the Tax Commission and the Commission would also be
relieving these businesses from the obligation imposed upon them by law to keep
full and accurate records of the exempt status of their transactions. It is the Petitioner's responsibility to
maintain accurate records and if Petitioner has neglected any aspect of this
responsibility, including the collection of affidavits, then they are
responsible for the consequences of their own action or lack of action and it
would normally not be the responsibility of nor would it be proper for the Tax
Commission to supply proof for the Petitioner.
This
policy, however, should not be routinely applied without regard to the
circumstances of each case. In this
case, the issue is the taxability of certain transactions, not who should
supply what documents. If a transaction
is exempt, it should not be held otherwise because of such a policy alone, and
if the Auditing Division has copies of affidavits or other proof that certain
transactions are exempt, then that proof in this case should not be withheld.
In proceedings before the Commission, the normal discovery process would be the
proper method by which a Petitioner could obtain the documents it needs from
the Auditing Division. This would
provide the necessary protection from abuse that the Auditing Division seeks,
and would also help to resolve issues as to the taxability of certain
transactions. Petitioner apparently did
seek informally to obtain these records from the Auditing Division, but did not
attempt to use the discovery process provided by the rules, such as interrogatories
or requests for production of documents.
CONCLUSIONS OF LAW
1. Utah Code Ann. §§59-12-103(1)(1)
and59-12-107(2) require that a sales tax shall be levied on tangible personal
property which is sold, stored, used, or consumed in Utah. There are strong indications that many of
the vehicles in question in the above transactions were "used or
consumed" within the state and, therefore, subject to sales tax.
2. Utah Code Ann. §59-12-104(9, 29) gives,
among others, two types of sales that are exempt from the sales and use
tax. Subsection (9) provides that sales
of vehicles to nonresidents where the vehicles are not used or registered in
Utah except to transport the vehicles to the border of the state are
exempt. Subsection (29) provides that
sales of property upon which sales or use taxes were paid in another state are
exempt. Although many of the above
sales may have been to nonresidents of the state of Utah, there is significant
evidence that many of those vehicles were used in Utah beyond merely transporting
them to the borders of the state. There
was no substantial argument by Petitioner that sales or use taxes were paid on
these transactions in another state.
Therefore, under these provisions many of the transactions listed above
do not meet the criteria to be exempt.
3. Utah Code Ann. §59-12-111(1) provides that
businesses collecting sales taxes are required to keep a complete record of all
sales. Pursuant to this statute, Tax
Commission regulationR865-19S-23(A, E) provides that sellers who sell to exempt
customers are required to keep records verifying an exemption, including such
records as exemption certificates and nonresident affidavits, and the burden is
on the seller to prove that each sale is exempt. If the seller cannot so prove
exempt status by producing a valid exemption certificate or other acceptable
evidence, then the sale is considered taxable and shall be paid by the
seller. In the transactions in this
case it is apparent that Petitioner did not meet its burden of proof by keeping
adequate records to indicate exempt status.
While a seller of goods is not required to perform the functions of a
detective for the state, it is required that the seller maintain adequate
verification on all exempt sales. This
has not been done in this case in any of the transactions in question except
for the XXXXX account. However, as
indicated above, affidavits or other proof of exemption, if any, that are in
the possession of the Auditing Division and not in the possession of
Petitioner, should be supplied to Petitioner by the Auditing Division.
4. Utah Administrative Rule R873-22l-M(B)(2, 3,
4), (C)(l) also applies in this case considering that Petitioner has cited Utah
Code Ann. § 41-1-l9(1)(f). The latter
statute states exceptions to vehicle registration requirements in Utah include
any vehicle not designed, used or maintained for passenger transportation, for
hire, or for transportation of property, if it is registered in another state
and is owned and operated by a nonresident of Utah. Petitioner argues that many
of the transactions involved in this case are of such a nature that the
vehicles in question are not required to be registered in Utah and that this is
an indication that such vehicles are also not subject to the sales and use tax
in Utah. However, the Administrative
Rule cited above in subsection (B)(2) states that a "resident" for
purposes of registering vehicles in Utah is a person engaging in interstate
business and operating the vehicle as part of the business within the state or
maintaining the vehicle with Utah as the home state. Subsection (B)(3) states that a "resident" is also
anyone except a tourist or student who owns, leases, or rents a residence or
place of business within Utah or who occupies a Utah place of business or
residence. Subsection (B)(4) states that
anyone accepting gainful employment in the state of Utah is also considered a
resident of the state for purposes of registering vehicles. Subsection (C) of this rule states that
anyone qualifying as a resident under the above provisions does not qualify as
a nonresident for sales tax exemption.
Subsection (C)(l) provides that vehicles of a type required to be
registered under the motor vehicle laws of this state which are used for
infrequent, occasional, non-business use in Utah will not invalidate the
exemption. It is clear that many of the
other transactions in this case involve people who would qualify under this
regulation as residents of the state of Utah and, therefore, their purchases
are subject to the sales tax. The other
instances where this is not so clear are at least highly questionable as to the
nonresident status of the persons involved or the use of the vehicle within
Utah.
5. In summary, there are in this case
essentially two issues that go to the exempt status of the purchases in question. The first issue is the use of the vehicle
and the second is the residence of the buyer.
In each of the instances in this case except the XXXXX account, it is
very clear that the use of the vehicle or the residence of the buyer was such
under the above statutes as to make the transactions non-exempt, or there was
at least sufficient question as to the use of the vehicle or residence of the
buyer to render the transactions taxable due to the fact that Petitioner has
been unable to meet its burden of proof to indicate otherwise.
DECISION AND ORDER
Based
upon the foregoing, it is the decision and order of the Utah State Tax
Commission that the request of the Petitioner regarding each transaction in
this case is denied, except for the following: Petitioner's request as to the
XXXXX transaction is granted, and as to the XXXXX accounts, the Auditing
Division is hereby ordered to supply copies of affidavits or other proof of
exemption, if there is any such proof in the Auditing Division's possession, to
the Petitioner within 60 days of the date of this decision. If these records do prove that some or all
of those transactions were exempt, then they will be disposed of accordingly
and Petitioner's request regarding them will be granted. If the Auditing Division still determines
that these records do not constitute adequate proof of exemption, then this
case may be reopened for a reconsideration of those accounts where a dispute
still exists.
DATED
this 3 day of May, 1990.
BY ORDER OF THE UTAH STATE TAX COMMISSION
R. H. Hansen Roger
O. Tew
Chairman Commissioner
Joe B.
Pacheco G.
Blaine Davis
Commissioner Commissioner