89-1028 - Use






Petitioner : FINDINGS OF FACT,






: Account No. XXXXX

Respondent :



This matter came before the Utah State Tax Commission pursuant to the Petitioner's Petition for Redetermination filed XXXXX arising from a sales tax deficiency assessed by the Auditing Division of the Utah State Tax Commission.

On XXXXX, a prehearing conference was held. Paul F. Iwasaki, Presiding Officer, conducted the prehearing conference. Present by telephone and representing the Petitioner were XXXXX and XXXXX. Present and representing the Respondent was XXXXX, Assistant Utah Attorney General.

At the prehearing conference it was agreed to by the parties that the Tax Commission may render its decision based upon the stipulated facts and written memoranda submitted by the parties.

Based upon the stipulated facts and memoranda submitted by the parties, the Tax Commission hereby makes its:


1. The tax in question is use tax.

2. The audit period in question is XXXXX.

3. The parties, by way of written stipulation, stipulated to the operative facts in this case. That document entitled "Stipulation of Facts was filed with the Commission on XXXXX. Those facts are incorporated by reference into this decision and are attached hereto.


Each vendor shall pay or collect and remit the sales taxes imposed by Title 59, Chapter 12, Utah Code Ann., if within the state the vendor directly or by any agent or other representatives: (i) has or utilizes an office, distribution house, sales house, warehouse, service enterprise, or other place of business; . . . (iv) regularly engages in the delivery of property in the state other than by common carrier or United States Mail . . . . (Utah Code Ann. 59-12-107(5)(a), 1987).

Taxpayers selling tangible personal property or services to exempt customers are required to keep records verifying the nontaxable status of such sales. Records shall include: sales invoices showing the name and identity of the customer, and exemption certificates for exempt sales of tangible personal

property or services if the exemption is shown on the exemption certificate forms or if the sale is to a government agency, and the total sale is $100 or less.

The burden of proving that a sale is for resale or otherwise exempt is upon the person who makes the sale. If any agent of the Tax Commission requests the vendor to produce a valid exemption certificate or other similar acceptable evidence to support the vendor's claim that a sale is for resale or otherwise exempt, and the vendor is unable to comply, the sale will be considered taxable and the tax shall be payable by the vendor. (Utah State Tax Commission Administrative Rule R865-23S).


In the present case, the issue to be determined by the Commission is whether or not the sales made by the Petitioner at its refineries located in Illinois and California to Utah customers is subject to use tax.

With respect to the Illinois sales, the Petitioner argued that the purchases were subject to Illinois sales tax however, in this case, were exempt because the purchasers had provided exemption certificates to the Petitioner. While such exemption certificates may have been provided, the Tax Commission, without further proof, is unable to substantiate such claims. Because claims that items of tangible personal property were purchased for resale are easily made, and because such claims are difficult to disprove, the Tax Commission has promulgated an Administrative Rule which requires that adequate records be maintained concerning such sales. Absent such records, a transaction is presumed to be a taxable transaction.

In the present case, the Petitioner was unable to provide the necessary records to verify the tax exempt status of the Illinois sales in question. Therefore, the Petitioner must bear the consequences and is liable for the use tax on such sales.

With respect to the California sales, the Petitioner argued that the sales were not subject to California sales tax because the tangible personal property sold was delivered to a point outside the state of California.

Under this argument, the Petitioner seems to be alleging that because the sale took place in California, and because California exempted such a transaction from sales tax because the property was to be delivered outside of California, such transaction is not subject to Utah use tax.

The Tax Commission finds the Petitioner's argument to be without merit. The Petitioner's theory is illogical and circular. It would allow for exemption from sales tax from the state in which the property was purchased on the basis that it was destined for delivery out of state, and then would allow for an exemption from use tax in the state in which the goods were delivered simply because it was originally exempt from sales tax as an out of state sale. Clearly, such an arrangement is not appropriate.

In its final argument, Petitioner claims that the imposition of the use tax under the circumstances in this case constitutes an unconstitutional burden upon interstate commerce and is thus prohibited by Article I, Section 8, of the United States Constitution.

As an administrative agency and not a judicial body established under the Constitution of the State of Utah, the Tax Commission is not empowered nor authorized to determine the legality or constitutionality of legislative enactments. Therefore, the state statutes in question which relates to the imposition of use tax are presumed to be constitutional and valid.

Based upon the foregoing, the Tax Commission affirms the determination of the auditing Division. Because, however, of the inordinate delay in resolving this matter, interest, if applicable, is to be calculated from the date of the liability to XXXXX. It is so ordered.

DATED this 20th day of August, 1992.


R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco S. Blaine Willes

Commissioner Commissioner