91-0349 - Sales








: Appeal No. 91-0349

: Account No. XXXXX



This matter came before the Utah State Tax Commission for a formal hearing on XXXXX. Joseph G. Linford, Presiding Officer, heard the matter for and on behalf of the Commission. Present and representing the Petitioner was XXXXX.

Based upon the evidence and testimony presented at the hearing, the Tax Commission hereby makes its:


1. The tax in question is sales tax.

2. The period in question is XXXXX.

3. During the period in question, Petitioner purchased a vehicle from XXXXX. At the time of the purchase, Petitioner maintained home and business locations both in Utah and Idaho, but spent the majority of his time in Idaho. Petitioner testified that he spent almost all of his time in Idaho during the years XXXXX, XXXXX and XXXXX, until he left to XXXXX. He did not pay Utah sales tax at the time of the purchase of the vehicle, but registered and paid tax in the state of Idaho. Petitioner testified that he did so because he was living in Idaho the vast majority of the time and felt that Idaho was the appropriate place to pay the sales tax and to register the vehicle. The tax has since been refunded to Petitioner from Idaho.

4. At the hearing, Petitioner testified that he could not remember specifically signing a nonresident affidavit in order to obtain the vehicle without paying Utah sales tax. He acknowledged he could have signed such a document but was under the impression that he should pay Idaho tax instead of Utah tax. Therefore, he would have thought it appropriate to sign the document.

5. A 50% penalty plus interest has been assessed by the Tax Commission for the untimely payment of the sales tax in question. The sales tax, penalty and interest have all since been paid by Petitioner. Petitioner requests that the penalty and interest be waived and refunded because Petitioner did not intend to evade the tax, but thought that he was proceeding properly in paying Idaho tax instead of Utah tax.


1. Utah Code Ann. Section 59-12-104(9) provides that sales of vehicles which are required to be registered in Utah, which are made to bona fide nonresidents of Utah and are not thereafter registered or used in the state except to transport them to the borders of the state, are exempt from the sales and use tax.

2. Utah Administrative Rule R873-22l-M.B. and C. provides in pertinent part as follows:

B. ...for the purposes of vehicle, boat, boat trailer or outboard motor registration, the term "resident" means, but is not limited to, the following:

1. Every person who is a legal resident of this state; (The fact that a person leaves the state temporarily will not be sufficient to terminate residency.)

2. Any person engaging in interstate business and operating a vehicle...as part of the business within this state, or any person maintaining a vehicle...with this state designated as the home state;

3. Any person, except a tourist temporarily within this state, or a student, covered under Rule R873-22M-4, who owns leases, or rents a residence or a place of business within this state, or occupies or permits to be occupied a Utah residence or place of business;

4. Any person engaging in a trade, profession, or occupation or accepting gainful employment in this state;

5. Any person allowing a vehicle...to be kept or used by a resident of this state; and

6. Any person declaring himself to be a resident of Utah to obtain privileges not ordinarily extended to nonresidents, such as going to school or placing children in school without paying nonresident tuition or fees, maintaining a Utah driver's license, etc.

C. Any person qualifying as a resident under the above definitions does not qualify as a nonresident for purposes of the exemption from sales tax under Utah Code Ann. 59-12-104.

3. Utah Code Ann. 59-1-401(3) provides in pertinent part as follows:

The penalty for underpayment of tax is as follows:

a. If any underpayment of tax is due to negligence, the penalty is 10% of the underpayment.

b. If any underpayment of tax is due to intentional disregard of law or rule, the penalty is 15% of the underpayment.

c. For intent to evade the tax, the penalty is the greater of $500 per period or 50% of the tax due.

4. Utah Code Ann. 59-1-402 provides that interest in the amount of 12% per annum shall be assessed when tax payments are not made in a timely manner.

5. Utah Code Ann. 59-1-401(8) provides that, upon reasonable cause shown, the Tax Commission may waive or reduce the penalties and interest imposed under the above provisions.


The facts indicate that a 50% penalty for intent to evade the tax is excessive in this case. Petitioner was negligent in failing to pay the tax in question in Utah, and therefore, a 10% negligence penalty is appropriate. The penalty should not be reduced beyond that point because Petitioner was negligent and the law requires that a negligence penalty be applied. No facts exist upon which to base a determination that the 50% penalty should be imposed. There is no indication that Petitioner had any intent to evade the tax.

Interest should not be waived because the state was deprived of the use of the tax funds in question for a period of time, through no fault of its own, and should be compensated for that loss of use.

Based upon the foregoing, the Tax Commission finds that sufficient cause has been shown which would justify a reduction of the penalty associated with the Petitioner's sales tax for XXXXX to the amount of $$$$$. Interest shall be adjusted to account for the reduction in the penalty amount. The additional penalty and interest amounts already paid by Petitioner are to be refunded. It is so ordered.

DATED this 6th day of June, 1991.


R. H. Hansen Roger O. Tew

Chairman Commissioner

Joe B. Pacheco G. Blaine Davis

Commissioner Commissioner