99-034

Response November 17, 1999

REQUEST LETTER

NAME:

Last week I spoke with you from the desk at the Enforcement Division. I came down to talk to you in person but you were to busy. I hope that you do recall our conversation. I indicated that I was planning on opening a car sales lot that was different than a regular dealership. I would own the property and rent the spaces for people to sell their automobiles themselves. Of course I would have liability insurance for the property. I know that this type of business is done in other states that I have seen. I see this type of business would be an asset to the state by reducing the amount of cars for sale on private property and public sites. This approach to individual private selling would reduce the eyesore of cars for sale in non‑zoned land.

I appreciate your input in this endeavor. During our conversation you indicated to me that I would have to become a dealer for this type of business. I don=t understand why I would have to be a dealer if I were not dealing cars. You indicated the state tax code that covers automobile dealers to be ATitle 41‑3". If there is more to this chapter could you please provide it to me for my attorney and I to review?

I came to the Enforcement Division before I proceeded to acquire land and to be up front with the department with my intentions. I feel that this type of business can benefit the state and provide an income for me. I hope that we can possibly come to terms and provide a service to the people that sell their own automobiles. I shall follow up with a telephone call to you to acknowledge your receipt of this letter and to pursue the next action.

Again, I appreciate your assistance in my business venture.

RESPONSE LETTER

November 17, 1999

RE: Dealer License for Proposed Business Activity

Dear NAME;

You have asked the Tax Commission whether a motor vehicle license will be required pursuant to Title 41, Chapter 3 of the Utah Code if you conduct the activities described below. Although your request was initially processed in error as an administrative appeal, the situation has been corrected and we now properly address your request through the advisory opinion process.

Facts. You plan to open an automobile sales lot where you would own the land, but not the automobiles offered for sale on the lot. Instead, you would rent spaces on the lot to automobile owners who would then sell their automobiles themselves. While you would receive rent consisting of a daily, weekly, or monthly fee from the automobile owners, you would not receive any other compensation resulting from the sale, purchase, or exchange of a motor vehicle, such as a commission on the selling price or value of the vehicle displayed, purchased, or sold. Nor would the rental fee be contingent on the vehicle owner=s success in selling the vehicle.

In addition, neither you, nor any employee acting for you or on your behalf, would be involved in the negotiation, sale, purchase, order, or exchange of any motor vehicle that is displayed on your automobile lot. For example, neither you nor any of your employees would offer test drives, provide required registration or titling paperwork, make phone calls on behalf of potential customers, discuss the cost of any vehicle displayed, discuss the quality of any vehicle displayed, take money on behalf of the owner of any vehicle displayed, enter into contracts with potential vehicle buyers, or arrange financing or recommend a financial institution.

Any advertising (television, radio, newspaper, Internet, signs, banners, bulletins, notices, mailings, etc.) concerning your proposed business would relate only to the rental of space in the

lot. No advertisement would indicate that you are in the business of selling, purchasing, ordering, or exchanging motor vehicles, nor would it include the price, make, or condition of any vehicle, or financing options, or statements concerning sales activities. There would, however, be signage at the lot indicating that the cars displayed were available for sale by their individual owners.

Discussion. Utah Code Ann. '41‑3‑102(8)(a) provides that Adealer@ means a person:

(i) whose business in whole or in part involves selling new, used, or new and used motor vehicles; and

(ii) who sells, displays for sale, or offers for sale or exchange three or more new or used motor vehicles in any 12-month period.

The Tax Commission is the administrative agency charged with interpreting this statute. It is not our prerogative to add additional requirements to the statute, nor is it our right to exempt anyone who should be governed by the statute. Nevertheless, to the extent there is any ambiguity in the statute, or in its proper application in any particular circumstance, it is our responsibility to try to effectuate the legislature=s intent in enacting the statute.

As indicated by the dissenting opinion, the application of this statute to the facts outlined above is not entirely clear. It is clear, for example, that you will not be in the business of Aselling new or used motor vehicles.@ It is less clear that your business will not Ainvolve selling@such vehicles. Similarly, it is clear that you will not Asell@ or Aoffer for sale@ three or more motor vehicles in the course of a year. It is less clear, however, that you will not Adisplay for sale@ three or more such vehicles.

Accordingly, it is appropriate on these facts to consider the policy reasons behind the licensing provisions. Those provisions were enacted to minimize the likelihood that Utah consumers would be dealing with disreputable sellers. By having signage and a fixed place of business, consumers know where they can find the dealer if the vehicle they purchase proves to be unsatisfactory. If they think they have been defrauded or misled, they can have recourse against the dealer=s bond. The licensing provisions also provide tools whereby our Motor Vehicle Enforcement Division can monitor proper titling of vehicles and reduce the number of stolen cars or improperly salvaged cars on the market.

Consumers who go to your car lot may think they will receive these protections. In fact, they will not. If the car is unsatisfactory, you will disavow any responsibility and will refer the consumer to the seller. If the seller cannot be located, the consumer will be Aout of luck.@ You will have no bond to which the buyer can have recourse for a faulty title or a faultier vehicle.

Ultimately, however, the seller=s liability in such a situation is a matter of contract law. To require you to be licensed when you will not be a party to any sale may give the buyer a false sense of security. If your lot indicates that you are a licensed dealer, the consumer may believe they are dealing with you, even though the contract lists another name. Similarly, if your signage indicates that you are a bonded dealer, a consumer may assume that he or she has recourse against that bond if the sale is unsatisfactory. Because you will not be a party to the sale, your bonding company may deny any such relief.

Conclusion. Subsection 102(8)(a)(i) requires a person to be licensed as a dealer if his or her business involves Aselling@ motor vehicles. Because you will not be involved in selling any motor vehicle located at your lot, and you will not enter into any contractual relationship with the buyers of the motor vehicles, we conclude that your business does not involve the selling of motor vehicles. Rather, it involves the rental of real property to people who are selling motor vehicles. Accordingly, we find that you are not a motor vehicle dealer as defined in Utah Code Ann. '41‑3‑102(8)(a). To require a license, in this case, may actually give potential customers a false sense of expectations. It should be made clear to such customers at every opportunity that they are not dealing with a licensed motor vehicle dealer and that they should take appropriate steps to protect their interests accordingly. Indeed, if your limited role in the proposed transactions is not made clear to the consumer, our own conclusion would be different.

Of course, we all have an interest in limiting fraud and dishonesty in the motor vehicle business. To help ensure that unlicensed dealers will not use your lot to illegally sell their vehicles, we would ask you to provide to the Motor Vehicle Enforcement Division a list, on a monthly basis, that contains: (1) the name, date of birth, address, and phone number of each person or persons who rent a space at your business; and (2) the year, make, model, license plate numbers, and VIN numbers of all vehicles displayed on the property during the month. If you suspect any improper activity, we would urge you to contact the Division immediately. Kent Jorgensen, who you have met, is most familiar with your proposed operation and is available to respond to your concerns. His phone number is ##### and his cellular number is #####.

Of course, our opinion is based on your proposed business operating in the manner described above. Should your actual operations be different, our opinion might also be different. Please contact us if you have any other questions.

For the Commission,

R. Bruce Johnson

Commissioner

Pam Hendrickson

Commissioner

DISSENTING OPINION

I respectfully dissent from the position taken by my colleagues in this advisory opinion. Subsection 102(8)(a)(i) requires a person to be licensed as a dealer if his or her business Ainvolves@ the selling of motor vehicles. The business activities you plan to conduct would involve the selling of motor vehicles, regardless of whether such vehicles are owned by you or whether you receive a commission on or percentage of the selling price. Your business would induce or attempt to induce persons to buy and sell motor vehicles by providing a centralized location for the displaying of these vehicles. Part of your success would depend on the number of motor vehicles you could induce automobile owners to display on your lot. Also, you would receive some form of compensation from the automobile sellers whose vehicles are displayed on your lot, even if that compensation is not in the form of a commission on the selling price. As such, these activities would Ainvolve@ your business in the selling of motor vehicles and, accordingly, subject you to the dealer licensing requirements.

In addition, I believe it better public policy to require your proposed business to be licensed because the public is accustomed to similar businesses being licensed. For example, a person who sells his or her automobile in the newspaper or parks it on the side of the road with a AFor Sale@ sign on it is rarely assumed to be an automobile dealer. Under these circumstances, a potential buyer may proceed with more caution than when purchasing from a licensed dealer. On the other hand, an automobile sales lot that displays automobiles for sale is generally a licensed dealership. When a person buys an automobile that is located on such a site, that buyer anticipates that the business is licensed and that certain protections are available to him or her because of that licensure. As your business has these latter characteristics, a buyer is very likely to assume that he or she may purchase a vehicle located on your property and also receive the protections available when purchasing from a licensed dealer. It is for these reasons that I respectfully disagree with the opinion of my colleagues.

Palmer DePaulis

Commissioner

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