It's the latest conflict between Utah's laws and companies with unconventional business models wanting to enter the state. Salt Lake City has had a long-running dispute with Uber and Lyft ride-booking companies that dispatch over the Internet. Last week, the House passed a bill undoing a state law that prohibited Zenefits from operating in Utah because it gives away free software to encourage customers to buy insurance through the company.
The Utah attorney general's office last week sent a letter to Tesla Motors on behalf of the Motor Vehicles Enforcement Division informing the company its license to sell cars in the state had been denied because it was defined under Utah law as a manufacturer and not a franchise owner.
Rep. Kim Coleman, R-West Jordan, is proposing a bill, HB394, that would let Tesla make direct sales in Utah. It cleared committee Wednesday and is headed to the full House.
"It's 2015. You can buy anything online," said Coleman. "We're about to drive a multimillion-dollar sales-tax-revenue base out of our state and we've rolled out the 'unwelcome' mat … so I think we need to change it."
Chen said Tesla expects to generate between $7 million and $10 million of economic activity in the state in its first year, along with a few dozen jobs. The company has been posting ads online to hire employees for the dealership.
With the dealership ready to open and time running out in the session, Chen said, there is some urgency to get a bill passed.
Tesla has run into similar problems in states such as Arizona, Texas and Connecticut. The company has called the states' laws anti-competitive, hostile to business and has asked state legislatures to change them.
Craig Bickmore, executive director of New Car Dealers of Utah, which opposes HB394, said the law is in place to help consumers. If they have a problem with their new car, he said, the dealer can act as an intermediary or advocate, rather than the customer having to go directly to the manufacturer.
"It has worked very well," he said.
Bickmore also questioned why a sophisticated company like Tesla didn't recognize the problem before it was ready to open the dealership doors.
"[The law] has been established for a long time and they didn't know that?" he said. "That's a little surprising for a high-tech company."
Chen said the company's attorneys thought they would be OK to sell cars in Utah and had early indications from the state they were right.
The rejection "puts a serious damper on our ability to invest in Utah," Chen said. "Unless, through either our discussions with the attorney general or the success by Rep. Coleman in getting her bill through, we are, in fact, stopped from being able to offer our vehicles for sale in Utah."