BEFORE THE UTAH STATE TAX COMMISSION
: 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
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
Joe B. Pacheco G. Blaine Davis