SALES & WITHHOLDING TAX
BEFORE THE UTAH STATE TAX COMMISSION
) Appeal No. 00-1118
) Account No. #####
TAXPAYER SERVICES DIVISION )
OF THE UTAH STATE TAX ) Tax Type: Sales & Withholding Tax
Respondent. ) Judge: Davis
G. Blaine Davis, Administrative Law Judge
For Petitioner: PETITIONER
Representative for Petitioner
For Respondent: Ms. Laurie Allred, from the Taxpayer Services Division
Ms. Jan Sanchez, from the Taxpayer Services Division
STATEMENT OF THE CASE
This matter came before the Commission for an Initial Hearing on January 8, 2001, pursuant to the provisions of Utah Code Ann. '59-1-502.5.
Petitioner has operated the business of Petitioner for approximately 25 years.
Approximately two years ago, Petitioner had a stroke, and then later had problems with his heart which restricted his ability to manage and operate the business. Out of necessity, he left his secretary and office manager in charge of most of the operations. She had been an employee for a period of 14 years, and based upon his past experience, he had confidence and trust in her. Filing the sales tax returns and withholding tax returns, and making payment thereon was one of the responsibilities which he gave to her in his absence.
In September of 1999, someone from the Utah State Tax Commission called him at his home and told him that Petitioner was late paying its sales tax again, and asked why he had paid late several times in the past. Petitioner said he did not know there was any problem, and was not aware that prior sales tax returns had been paid late.
Following the contact from the Tax Commission, he contacted his office manager and asked her why the taxes had been paid late. She responded that the State must be mistaken, and she would take care of it. She further represented that the taxes were being automatically withdrawn from the bank account, and they had never been late or incurred any penalties or interest. Over the next several days, she again represented that the State had just made a mistake, and she had taken care of it with the Tax Commission.
Notwithstanding the representations of the office manager, Petitioner became suspicious and called the Tax Commission later in September of 1999 and was informed there was no mistake, and the business tax returns had been late several times during the past year. Petitioner then confronted the office manager about the lateness of the tax returns, penalties and interest, and she again told him the State had made a mistake and there were no penalties or interest. PETITIONER then told her he had talked to the State Tax Commission personally, and asked why she had lied to him. She said she was sorry and had no explanation.
Petitioner next called his accountant and asked for an audit of the books, which determined that numerous things had not been handled correctly and that many thousands of dollars in penalties and interest had been paid, not only to the State Tax Commission, but to other government agencies and creditors.
Petitioner made further investigations, and determined that the office manager was drug dependent and had an alcohol problem, and had apparently embezzled further funds from the business. Based upon the facts he discovered, he terminated the office manager as an employee.
Petitiioner then had his accountant contact the State Tax Commission to obtain a breakdown of penalties for some of the previous periods, and based upon filing an application for refund and waiver of the penalties, he did obtain a refund of approximately $$$$$, but Ms. Jan Sanchez, from the State Tax Commission, asked why he didn't request a refund for all of the periods for the past three years. Petitioner indicated he did not know there were any other periods, so he came to the Tax Commission and discussed the prior history with NAME and determined the total penalties paid were nearly $$$$$. The office manager had paid those items by preparing checks which merely indicated they were for taxes, and did not break down the payment between taxes, penalties and interest. There was no documentation readily available to determine such a breakdown.
Upon determining the problem, Petitioner had his accountant prepare prior returns for some of the periods, and get them filed, and then later he prepared the returns for the remaining periods and filed them. Petitioner is now seeking a waiver of the penalties based upon the actions and embezzlement of the office manager.
Although there have been numerous late filings of both sales tax and withholding tax returns following the health problems of Petitioner, prior to that time Petitioner had a very good filing and payment record. It is clear the problems did not occur until Petitioner had health problems and left the business to be managed by the office manager, who apparently, knowingly and intentionally, did not comply with the filing and payment requirements to help hide and cover up other problems, including embezzlement, of the funds of the business.
Petitioner has paid the penalties for which he is requesting a waiver, so waiver of the penalties will require a refund of the amounts paid.
The Tax Commission is granted the authority to waive, reduce, or compromise penalties and interest upon a showing of reasonable cause. Utah Code Ann. '59-1-401(10).
DECISION AND ORDER
Based upon the foregoing, the Commission finds that sufficient cause has been shown to justify a waiver of the penalties for the sales and withholding tax returns for 1997, 1998 and 1999. Such penalties, to the extent not previously refunded, shall be refunded to Petitioner. It is so ordered.
This decision does not limit a party's right to a Formal Hearing. However, this Decision and Order will become the Final Decision and Order of the Commission unless any party to this case files a written request within thirty (30) days of the date of this decision to proceed to a Formal Hearing. Such a request shall be mailed to the address listed below and must include the Petitioner's name, address, and appeal number:
Utah State Tax Commission
210 North 1950 West
Salt Lake City, Utah 84134
Failure to request a Formal Hearing will preclude any further appeal rights in this matter.
DATED this 17th day of January , 2001.
G. Blaine Davis
Administrative Law Judge
BY ORDER OF THE UTAH STATE TAX COMMISSION:
The Commission has reviewed this case and the undersigned concur in this decision.
DATED this 17th day of January , 2001.
Pam Hendrickson R. Bruce Johnson
Commission Chair Commissioner
Palmer DePaulis Marc B. Johnson