99-048

Response September 27, 2000

REQUEST LETTER

99‑048

Dear NAME,

This letter is a request for information and an opinion from the Tax Commission regarding a matter of titling we talked about earlier today. We are having a problem with titling of vehicles (motor homes & trailers) to customers who live out of state. Each state varies as to the manner in which they title vehicles making the end result difficult to predict. The problem stems from a situation where we sell a vehicle to a non-resident consumer, and we arrange the financing, usually with a Salt Lake bank. In many cases we are forced to send the title to the customer so he can go to his county or state and have the vehicle licensed & re-titled showing the bank as the lien holder.

The problem comes into play when, for various reasons, the customer does not do his part to get a new title and perfect the lien of the bank. Some states allow a person to license the vehicle without a title or registration. As a result both COMPANY and the bank are left in a very difficult situation should the consumer quit making payments, or worse still, file bankruptcy. We have such a case right now, and a second similar situation where the customer is delinquent.

Here is my view of the solution. If we could submit application for Atitle only@ in Utah in the name of the customer with his out of state address, showing the lien of the bank and get a Utah title we would protect both the Bank and us in the event the customer defaults. We would not be registering and plating these vehicles. In talking with you and your people it seems that this should be no problem. What could create a problem is if the Tax Commission expects to collect Sales Tax as a result of only titling the vehicle. My hope is that they would recognize, that in as much as the customer is a non-resident, not using the vehicle in the state, that the state is not due the sales tax.

The reason for allowing this type of titling is to protect Utah businesses from out of state consumers who fall on hard times or who are otherwise unscrupulous. If we were required to pay the sales tax we would be left in a position where it would not be profitable to make the sale, thus the income tax that we and the banks pay to the state on our profits from the sale would be lost. So it seems a fair and prudent solution.

What I would like to get is an opinion letter from the Tax Commission approved by the commissioners that would allow this procedure to move forward. If you would please help in procuring the same I would greatly appreciate it. If you or the commission has need of further information or clarification please don't hesitate to call me at #####.

Sincerely,

RESPONSE LETTER

September 27, 2000

RE: Advisory Opinion - Titling Vehicles Purchased in Utah, Then Immediately Taken Out-of-State

Dear NAME,

The Tax Commission has received your request for information pertaining to the titling of recreational vehicles purchased in Utah by non-residents, then transported out of state. Specifically, you ask if a local finance company can require an out-of-state vehicle purchaser to title the vehicle in Utah for purposes of perfecting the finance company=s security interest in the vehicle. Further, you ask if the title can be obtained without payment of Utah sales tax on the transaction.

Sales tax is due on the purchase of a vehicle in Utah only if the transaction itself is taxable in Utah. There is no Utah sales tax due on the purchase of a vehicle in Utah by a bona fide nonresident who signs a Nonresident Affidavit, removes the vehicle from Utah and otherwise complies with the qualifications for exemption as outlined on the affidavit form TC-583 and Utah Administrative Rule R865-19S-98 (copies enclosed).

Turning to your question regarding Utah title, Utah law does not contemplate a title-only transaction to secure a lien on a vehicle that is titled and registered in another state. Furthermore, we do not believe that a title-only transaction here will resolve the finance company=s concerns. Presumably any vehicle purchased by a nonresident will be titled in the purchaser=s state of residence or in the state where the vehicle is registered. That is the title that subsequent purchasers or encumbrancers look to for lien information, and that is the title that the finance company must use to perfect its lien.

Procedurally, you and the finance company can take steps to ensure that the lien is properly recorded on the out-of-state title. Upon sale of a vehicle to a nonresident purchaser, you should complete the title application and deliver or mail it directly to the state of registration in accordance with the procedures established in that state. If the vehicle owner fails to register the vehicle in that state within a reasonable time, the title documents should be returned to you or the finance company according to your instructions.

If you have additional questions, please let us know.

For the Commission,

Marc B. Johnson

Commissioner