99-022 Response February 20, 2000

99-022

Response February 20, 2000

REQUEST LETTER

March 11,1999

l am writing to request an advisory opinion concerning sales tax on out of state purchases by Utah residents. I spoke with you several days ago concerning this matter.

Our company is involved in the sale of recreational vehicles. These vehicles range from fold down tent campers which sale for $3000.00 or better, all the way up to diesel powered motor homes that sale for in excess of $200,000.00. We have made a major commitment to our industry in which we have constructed a new $$$$$ facility located on ##### acres in CITY, Utah. Our goal is to provide the best service and value to our customers in their RV purchase experience.

The more expensive the unit our customers our trying to buy, the greater distance they will go in their shopping. This is understandable and we have no problem competing heads up on product, and our dealership. The problem is that of sales tax, something we can't control. Every $200,000.00 unit we don't sell, the state will loose over $12,000.00 in revenue, something we all should be concerned with.

We have customers tell us they can buy in Montana without having to pay any sales tax. In my research I found that they are setting up holding companies in Montana, registering the unit there and by doing so they are told they are not subject to our sales tax. I found one of the dealers in Montana, who has the same product as we carry, has sent in the warranty registrations with our manufacturer using his address for over 20 units. I have enclosed a copy of those names, but I

do not know how many are Utah residents. I have also enclosed several advertisements that appear in several consumer trade magazines. I can not help but think that by doing this for the sole intent of avoiding sales tax is illegal.

I spoke with NAME several months ago concerning this same issue. I appreciate any help you can give concerning this. Should you need any additional information or clarification please call me at ##### or my cell phone at #####. I will be happy to assist you in any way.

Thank you

NAME

President

RESPONSE LETTER

February 22, 2000

NAME

ADDRESS

RE: Use Tax Application to Motor Homes Bought in Montana by Utah Residents

Dear NAME,

We have received your advisory opinion request concerning the Utah sales and use tax consequences for a Utah resident who purchases a motor home in Montana. According to your letter, the Utah resident, when purchasing the motor home in Montana, will set up a Montana holding company which will hold title to the motor home. It is the Montana holding company that then purchases the motor home and registers it in Montana. Under these circumstances, you ask whether a Utah resident who purchases a motor home in Montana is subject to Utah=s sales and use tax on the purchase of that motor home.

Utah Code Ann. '41-1a-201 provides that unless exempted, a motor vehicle may not be operated in Utah unless it has been registered with Utah. Utah Code Ann. '41-1a-202(2)(a) does exempt from registration vehicles registered in another state and owned by a nonresident of Utah. In the situation you have described, the motor home is registered in Montana and owned by a Montana holding company. A Montana LLC may still be a Utah resident if it stores and uses property in this state. See Section 41-1a-202(1)(b)(i)(B). Section 41-1a-202(3) further provides that once an owner is considered a Aresident@ for registration purposes, the registration of the vehicle must occur within 60 days of that residency being established.

Thus, Utah law is clear that if a motor home is purchased and registered in Montana, but operated and stored in Utah, that motor home is not only subject to Utah sales and use tax on its purchase price, but also to Utah=s registration and titling requirements. Purchasing and registering a motor home in another state under the pretense that it will not be stored or operated in Utah is a violation of Utah law. This is true even if the motor home=s legal owner (i.e., the Montana holding company) is domiciled in that other state. For example, there are many Delaware corporations that own vehicles operated in Utah, and those vehicles must be registered and titled in Utah, not in Delaware. The requirements are no different for a motor home owned by a Montana holding company.

A person operating a motor home in Utah in violation of the '41-1a-202(3) registration requirements may be charged with a class B misdemeanor and subject to a minimum fine of $1000.00. Please contact us if you have any other questions.

For the Commission,